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Tacit Coordination in a Decentralized Market Entry Game with Fixed Capacity

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Author Info

  • Rami Zwick

    (Hong Kong University of Science and Technology)

  • Amnon Rapoport

    (Hong Kong University of Science and Technology)

Abstract

Tacit coordination is studied experimentally in a class of iterated market entry games with a relatively small number of potential entrants (n = 6), symmetric players, and fixed entry fees. These games are intended to simulate a situation where a newly emergent market opportunity may be fruitfully exploited by no more than a fixed and commonly known number of firms. Our results indicate a high degree of sensitivity to the game parameters that are manipulated in the study, namely, the market capacity, entry fee, and method of subject assignment to groups (fixed vs. random), as well as sophisticated adaptation to actual and hypothetical changes in wealth level. We find no support for convergence to equilibrium play on either the aggregate or individual level or for any trend across rounds of play to maximize total group payoff by lowering the frequency of entry. The coordination failure is attributed to certain features of the payoff function that induce strong competition in the attempt to penetrate the market.

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File URL: http://128.118.178.162/eps/exp/papers/9903/9903001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Experimental with number 9903001.

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Length: 42 pages
Date of creation: 16 Mar 1999
Date of revision:
Handle: RePEc:wpa:wuwpex:9903001

Note: Type of Document - Acrobat PDF; prepared on PC; to print on PostScript; pages: 42 ; figures: included
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Web page: http://128.118.178.162

Related research

Keywords: Tacit Coordination; Market Entry Game; Experiment;

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References

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  1. Nick Feltovich, 2000. "Reinforcement-Based vs. Belief-Based Learning Models in Experimental Asymmetric-Information," Econometrica, Econometric Society, vol. 68(3), pages 605-642, May.
  2. John Duffy & Ed Hopkins, 2004. "Learning, Information and Sorting in Market Entry Games: Theory and Evidence," ESE Discussion Papers 78, Edinburgh School of Economics, University of Edinburgh.
  3. 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.
  4. John B Van Huyck & Raymond C Battalio & Richard O Beil, 1997. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 1225, David K. Levine.
  5. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  6. 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.
  7. 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.
  8. 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.
  9. A. Roth & I. Er’ev, 2010. "Learning in Extensive Form Games: Experimental Data and Simple Dynamic Models in the Intermediate Run," Levine's Working Paper Archive 387, David K. Levine.
  10. Martin Sefton, 1999. "A Model of Behavior in Coordination Game Experiments," Experimental Economics, Springer, vol. 2(2), pages 151-164, December.
  11. Roth, Alvin E. & Erev, Ido, 1995. "Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term," Games and Economic Behavior, Elsevier, vol. 8(1), pages 164-212.
  12. 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.
  13. Lucas, Robert E, Jr, 1986. "Adaptive Behavior and Economic Theory," The Journal of Business, University of Chicago Press, vol. 59(4), pages S401-26, October.
  14. 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.
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Cited by:
  1. Pietro Dindo & Jan Tuinstra, 2011. "A Class of Evolutionary Models for Participation Games with Negative Feedback," Computational Economics, Society for Computational Economics, vol. 37(3), pages 267-300, March.
  2. Daniel Cracau & Abdolkarim Sadrieh, 2014. "The Divergent Effects of Long-Term and Short-Term Entry Investments on Home Market Cartels," FEMM Working Papers 140003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  3. Rami Zwick & Amnon Rapoport & Alison King Chung Lo, 2001. "Behavioral Strategies in Repeated Pure Coordination Games," Experimental 0110004, EconWPA.
  4. Giovanna Devetag & Francesca Pancotto & Thomas Brenner, 2011. "The Minority Game Unpacked: Coordination and Competition in a Team-based Experiment," CEEL Working Papers 1102, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  5. Kets, W., 2007. "The Minority Game: An Economics Perspective," Discussion Paper 2007-53, Tilburg University, Center for Economic Research.
  6. Dindo, P.D.E. & Tuinstra, J., 2006. "A Behavioral Model for Participation Games with Negative Feedback," CeNDEF Working Papers 06-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  7. Giulio Bottazzi & Giovanna Devetag, 2002. "Coordination and self-organization in minority games: experimental evidence," CEEL Working Papers 0215, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.

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