Competitive Behavior in Market Games: Evidence and Theory
AbstractWe explore whether competitive outcomes arise in an experimental implementation of a market game, introduced by Shubik (1973) . Market games obtain Pareto inferior (strict) Nash equilibria, in which some or possibly all markets are closed. We find that subjects do not coordinate on autarkic Nash equilibria, but favor more efficient Nash equilibria in which all markets are open. As the number of subjects participating in the market game increases, the Nash equilibrium they achieve approximates the associated competitive equilibrium of the underlying economy. Motivated by these findings, we provide a theoretical argument for why evolutionary forces can lead to competitive outcomes in market games.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Pittsburgh, Department of Economics in its series Working Papers with number 201.
Date of creation: Jan 2006
Date of revision: Sep 2008
Other versions of this item:
- Duffy, John & Matros, Alexander & Temzelides, Ted, 2011. "Competitive behavior in market games: Evidence and theory," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1437-1463, July.
- John Duffy & Alexander Matros & Ted Temzelides, 2008. "Competitive Behavior in Market Games: Evidence and Theory," Working Papers 366, University of Pittsburgh, Department of Economics, revised Mar 2009.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-14 (All new papers)
- NEP-EVO-2006-10-14 (Evolutionary Economics)
- NEP-GTH-2006-10-14 (Game Theory)
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.:
- Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, December.
- Fernando Vega-Redondo, 1997.
"The Evolution of Walrasian Behavior,"
Econometric Society, vol. 65(2), pages 375-384, March.
- Massimo Morelli & Sayantan Ghosal, 2001.
"Retrading in Market Games,"
01-09, Ohio State University, Department of Economics.
- Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October.
- Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211.
- Friedman, Daniel & Ostroy, Joseph, 1995. "Competitivity in Auction Markets: An Experimental and Theoretical Investigation," Economic Journal, Royal Economic Society, vol. 105(428), pages 22-53, January.
- Peck, James & Shell, Karl, 1990. "Liquid markets and competition," Games and Economic Behavior, Elsevier, vol. 2(4), pages 362-377, December.
- Dubey, Pradeep & Shubik, Martin, 1978. "A theory of money and financial institutions. 28. The non-cooperative equilibria of a closed trading economy with market supply and bidding strategies," Journal of Economic Theory, Elsevier, vol. 17(1), pages 1-20, February.
- Timothy N. Cason & Daniel Friedman, 1997. "Price Formation in Single Call Markets," Econometrica, Econometric Society, vol. 65(2), pages 311-346, March.
- Holt, Charles A & Langan, Loren W & Villamil, Anne P, 1986. "Market Power in Oral Double Auctions," Economic Inquiry, Western Economic Association International, vol. 24(1), pages 107-23, January.
- Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
- Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
- Peck, James & Shell, Karl & Spear, Stephen E., 1992. "The market game: existence and structure of equilibrium," Journal of Mathematical Economics, Elsevier, vol. 21(3), pages 271-299.
- Dubey, Pradeep & Shubik, Martin, 1977.
"A closed economic system with production and exchange modelled as a game of strategy,"
Journal of Mathematical Economics,
Elsevier, vol. 4(3), pages 253-287, December.
- Pradeep Dubey & Martin Shubik, 1976. "A Closed Economic System with Production and Exchange Modelled as a Game of Strategy," Cowles Foundation Discussion Papers 429, Cowles Foundation for Research in Economics, Yale University.
- Postlewaite, A & Schmeidler, David, 1978. "Approximate Efficiency of Non-Walrasian Nash Equilibria," Econometrica, Econometric Society, vol. 46(1), pages 127-35, January.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Isaac, R. Mark & Plott, Charles R., .
"The Opportunity for Conspiracy in Restraint of Trade: An Experimental Study,"
255, California Institute of Technology, Division of the Humanities and Social Sciences.
- Isaac, R. Mark & Plott, Charles R., 1981. "The opportunity for conspiracy in restraint of trade : An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 2(1), pages 1-30, March.
- Mark A. Satterthwaite & Steven R. Williams, 2002. "The Optimality of a Simple Market Mechanism," Econometrica, Econometric Society, vol. 70(5), pages 1841-1863, September.
- Schaffer, Mark E., 1989. "Are profit-maximisers the best survivors? : A Darwinian model of economic natural selection," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 29-45, August.
- Vasin, A., 2010. "Evolutionary Game Theory and Economics. Part 2. Stability of Equilibria. Special Features of Human Behavior Evolution," Journal of the New Economic Association, New Economic Association, issue 5, pages 10-27.
- Duersch, Peter & Oechssler, Joerg & Schipper, Burkhard C, 2010.
"Pure Saddle Points and Symmetric Relative Payoff Games,"
20864, University Library of Munich, Germany.
- Peter Duersch & Joerg Oechssler & Burkhard C. Schipper, 2010. "Pure Saddle Points and Symmetric Relative Payoff Games," Working Papers 104, University of California, Davis, Department of Economics.
- Duersch, Peter & Oechssler, Jörg & Schipper, Burkhard C., 2010. "Pure Saddle Points and Symmetric Relative Payoff Games," Working Papers 0500, University of Heidelberg, Department of Economics.
- Dmitry Levando, 2012. "A Survey Of Strategic Market Games," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(194), pages 63-106, July - Se.
- Peter Duersch & Joerg Oechssler & Burkhard Schipper, 2010.
"Pure Strategy Equilibria in Symmetric Two-Player Zero-Sum Games,"
1021, University of California, Davis, Department of Economics.
- Peter Duersch & Jörg Oechssler & Burkhard Schipper, 2012. "Pure strategy equilibria in symmetric two-player zero-sum games," International Journal of Game Theory, Springer, vol. 41(3), pages 553-564, August.
- Régis Breton & Bertrand Gobillard, 2006.
"Robustness of equilibrium price dispersion in finite market games,"
EconomiX Working Papers
2006-10, University of Paris West - Nanterre la Défense, EconomiX.
- Breton, Régis & Gobillard, Bertrand, 2011. "Robustness of equilibrium price dispersion in finite market games," TSE Working Papers 11-308, Toulouse School of Economics (TSE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alistair Wilson).
If references are entirely missing, you can add them using this form.