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Tacit Coordination in a Decentralized Market Entry Game with Fixed Capacity

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Author Info
Rami Zwick ()
Amnon Rapoport ()

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Abstract

We focus on a class of market entry games in which a newly emergent market opportunity may be fruitfully exploited by no more than a commonly known, exogenously determined number of firms. Our results show significant effects of the parameters manipulated in the study, namely, the market capacity, entry fee, and method of subject assignment to groups (fixed vs. random). In contrast to previous market entry games with linear payoff functions, we find no evidence of convergence to equilibrium play on the aggregate level. Shifting the focus of the analysis from the aggregate to the individual level, four clusters of subjects are identified. The patterns are: (1) choice of the same action that is independent of the parameters of the game or the outcome of previous presentations of the same game; (2) random choices with probabilities prescribed by the equilibrium solution for risk-neutral players; (3) random choices with probabilities equal to the individual observed overall proportion of entry; and (4) sequential dependencies that violate any model that assumes randomization. Subjects in the fourth and largest category are shown to adjust their choices in accordance with a simple principle of strategic reasoning. Copyright Kluwer Academic Publishers 2002

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File URL: http://hdl.handle.net/10.1023/A:1020892405622
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Publisher Info
Article provided by Springer in its journal Experimental Economics.

Volume (Year): 5 (2002)
Issue (Month): 3 (December)
Pages: 253-272
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Handle: RePEc:kap:expeco:v:5:y:2002:i:3:p:253-272

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Related research
Keywords: coordination; market entry game; experiment; Nash equilibrium;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Duffy, John & Hopkins, Ed, 2005. "Learning, information, and sorting in market entry games: theory and evidence," Games and Economic Behavior, Elsevier, vol. 51(1), pages 31-62, April. [Downloadable!] (restricted)
    Other versions:
  2. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  3. Sundali, James A. & Rapoport, Amnon & Seale, Darryl A., 1995. "Coordination in Market Entry Games with Symmetric Players," Organizational Behavior and Human Decision Processes, Elsevier, vol. 64(2), pages 203-218, November. [Downloadable!] (restricted)
  4. Ernan Haruvy & Dale O. Stahl & Paul W. Wilson, 2001. "Modeling And Testing For Heterogeneity In Observed Strategic Behavior," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 146-157, February. [Downloadable!] (restricted)
  5. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July. [Downloadable!] (restricted)
  6. Nick Feltovich, 2000. "Reinforcement-Based vs. Belief-Based Learning Models in Experimental Asymmetric-Information," Econometrica, Econometric Society, vol. 68(3), pages 605-642, May.
  7. Ochs, Jack, 1990. "The Coordination Problem in Decentralized Markets: An Experiment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 545-59, May. [Downloadable!] (restricted)
  8. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  9. Cooper, Russell, et al, 1990. "Selection Criteria in Coordination Games: Some Experimental Results," American Economic Review, American Economic Association, vol. 80(1), pages 218-33, March. [Downloadable!] (restricted)
  10. Martin Sefton, 1999. "A Model of Behavior in Coordination Game Experiments," Experimental Economics, Springer, vol. 2(2), pages 151-164, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Giulio Bottazzi & Giovanna Devetag, 2002. "Coordination and Self-Organization in Minority Games: Experimental Evidence," ROCK Working Papers 019, Department of Computer and Management Sciences, University of Trento, Italy, revised 12 Jun 2008. [Downloadable!]
    Other versions:
  2. Pietro Dindo & Jan Tuinstra, 2006. "A Behavioral Model for Participation Games with Negative Feedback," Tinbergen Institute Discussion Papers 06-073/1, Tinbergen Institute. [Downloadable!]
    Other versions:
  3. Kets, W., 2007. "The Minority Game: An Economics Perspective," Discussion Paper 2007-53, Tilburg University, Center for Economic Research. [Downloadable!]
  4. Rami Zwick & Amnon Rapoport & Alison King Chung Lo, 2001. "Behavioral Strategies in Repeated Pure Coordination Games," Experimental 0110004, EconWPA. [Downloadable!]
  5. Willemien Kets, 2007. "The minority game: An economics perspective," Quantitative Finance Papers 0706.4432, arXiv.org. [Downloadable!]
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