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Noisy leadership: An experimental approach

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  • Güth, W.
  • Müller, W.

    (Tilburg University)

  • Spiegel, Y.

Abstract

We examine the strategic behavior of leaders and followers in sequential duopoly experiments in which followers either perfectly observe the leaders’ actions or else observe nothing. Our experiments show that consistent with the theory, leaders enjoy a greater …rst-mover advantage when followers observe their actions with higher probability. However, the results also show that (i) leaders do not fully exploit their …rst-mover advantage, (ii) when informed, followers tend to overreact slightly (i.e., choose quantities above their best-response to the leaders’ quantities), and (iii) when uninformed, followers try to predict leaders’ quantities and react optimally. This suggests that followers view the symmetric Cournot outcome as “fair” and whenever they observe leaders who are trying to exploit their …rst-mover advantage, they “punish” them by overreacting. Such punishments in turn induce leaders to behave more softly than the theory predicts.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-193643.

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Date of creation: 2006
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Publication status: Published in Games and Economic Behavior (2006) v.57, p.37-62
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-193643

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Web page: http://www.tilburguniversity.edu/

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Citations

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Cited by:
  1. Anders Poulsen & Michael Roos, 2010. "Do people make strategic commitments? Experimental evidence on strategic information avoidance," Experimental Economics, Springer, vol. 13(2), pages 206-225, June.
  2. Anders U. Poulsen & Michael V. M. Roos, 2009. "Do People Make Strategic Moves? Experimental Evidence on Strategic Information Avoidance," Discussion Papers 09-06, University of Copenhagen. Department of Economics.
  3. Tanja Hörtnagl & Rudolf Kerschbamer, 2014. "How the Value of Information Shapes the Value of Commitment Or: Why the Value of Commitment Does Not Vanish," Working Papers 2014-03, Faculty of Economics and Statistics, University of Innsbruck.
  4. Anders Poulsen & Jonathan Tan, 2007. "Information acquisition in the ultimatum game: An experimental study," Experimental Economics, Springer, vol. 10(4), pages 391-409, December.
  5. Hildenbrand, Andreas, 2010. "Cournot or Stackelberg competition? A survey on experimental evidence," MPRA Paper 24468, University Library of Munich, Germany.
  6. S.N. O'Higgins & Arturo Palomba & Patrizia Sbriglia, 2010. "Second Mover Advantage and Bertrand Dynamic Competition: An Experiment," Labsi Experimental Economics Laboratory University of Siena 028, University of Siena.
  7. repec:hal:cesptp:halshs-00178474 is not listed on IDEAS
  8. Poulsen, Anders, 2007. "Learning to Make Strategic Moves: Experimental Evidence," MPRA Paper 10927, University Library of Munich, Germany.

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