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Decision time and steps of reasoning in a competitive market entry game

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  • Florian Lindner

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Abstract

Entry decisions in market entry games usually depend on the belief about how many others are entering the market, the belief about the own rank in a real effort task, and subjects' risk preferences. In this paper I am able to replicate these basic results and examine two further dimensions: (i) the level of strategic sophistication, which has a positive impact on entry decisions, and (ii) the impact of time pressure, which has a (partly) negative influence on entry rates. Furthermore, when ranks are determined using a real effort task, differences in entry rates are explainable by higher competitiveness of males. Additionally, I show that individual characteristics are more important for the entry decision in more competitive environments.

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Bibliographic Info

Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2013-19.

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Length: 25
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:inn:wpaper:2013-19

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Keywords: Market entry game; Time pressure; Level-k reasoning; Risk; Competitiveness; Experiment;

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  1. Sutter, Matthias & Kocher, Martin G. & Strauß, Sabine, 2003. "Bargaining under time pressure in an experimental ultimatum game," Munich Reprints in Economics, University of Munich, Department of Economics 18220, University of Munich, Department of Economics.
  2. Duffy, John & Hopkins, Ed, 2005. "Learning, information, and sorting in market entry games: theory and evidence," Games and Economic Behavior, Elsevier, Elsevier, vol. 51(1), pages 31-62, April.
  3. Lindner, Florian & Sutter, Matthias, 2013. "Level-k reasoning and time pressure in the 11-20 money request game," Munich Reprints in Economics, University of Munich, Department of Economics 19234, University of Munich, Department of Economics.
  4. Erev, Ido & Rapoport, Amnon, 1998. "Coordination, "Magic," and Reinforcement Learning in a Market Entry Game," Games and Economic Behavior, Elsevier, Elsevier, vol. 23(2), pages 146-175, May.
  5. Ariel Rubinstein, 2007. "Instinctive and Cognitive Reasoning: A Study of Response Times," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(523), pages 1243-1259, October.
  6. Fox, Craig R & Tversky, Amos, 1995. "Ambiguity Aversion and Comparative Ignorance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 585-603, August.
  7. David Gill & Victoria Prowse, 2011. "A Structural Analysis of Disappointment Aversion in a Real Effort Competition," Discussion Papers, University of Oxford, Nuffield College 2011001, University of Oxford, Nuffield College.
  8. Madiès, Thierry & Villeval, Marie Claire & Wasmer, Malgorzata, 2013. "Intergenerational attitudes towards strategic uncertainty and competition: A field experiment in a Swiss bank," European Economic Review, Elsevier, Elsevier, vol. 61(C), pages 153-168.
  9. Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 306-318, March.
  10. Ayala Arad & Ariel Rubinstein, 2012. "The 11-20 Money Request Game: A Level-k Reasoning Study," American Economic Review, American Economic Association, American Economic Association, vol. 102(7), pages 3561-73, December.
  11. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, American Economic Association, vol. 92(4), pages 1093-1103, September.
  12. Kocher, Martin G. & Pahlke, Julius & Trautmann, Stefan T., 2013. "Tempus Fugit: Time pressure in risky decisions," Munich Reprints in Economics, University of Munich, Department of Economics 18174, University of Munich, Department of Economics.
  13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, Springer, vol. 10(2), pages 171-178, June.
  14. Ido Erev & Eyal Ert & Alvin E. Roth, 2010. "A Choice Prediction Competition for Market Entry Games: An Introduction," Games, MDPI, Open Access Journal, MDPI, Open Access Journal, vol. 1(2), pages 117-136, May.
  15. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  16. Ariel Rubinstein, 2007. "Instinctive and Cognitive Reasoning: Response Times Study," Levine's Bibliography 321307000000001011, UCLA Department of Economics.
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