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Estimating a Parsimonious Model of Inequality Aversion in Stackelberg Duopoly Experiments

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  • Sau-Him Paul Lau
  • Felix Leung

Abstract

In the Stackelberg duopoly experiments in Huck "et al." (2001) , nearly half of the followers' behaviours are inconsistent with conventional prediction. We use a test in which the conventional self-interested model is nested as a special case of an inequality aversion model. Maximum likelihood methods applied to the Huck "et al." (2001) data set reject the self-interested model. We find that almost 40% of the players have disadvantageous inequality aversion that is statistically different from zero and economically significant, but advantageous inequality aversion is relatively unimportant. These estimates provide support for a more parsimonious model with no advantageous inequality aversion. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2010.

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  • Sau-Him Paul Lau & Felix Leung, 2010. "Estimating a Parsimonious Model of Inequality Aversion in Stackelberg Duopoly Experiments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(5), pages 669-686, October.
  • Handle: RePEc:bla:obuest:v:72:y:2010:i:5:p:669-686
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    Cited by:

    1. Cardella, Eric & Chiu, Ray, 2012. "Stackelberg in the lab: The effect of group decision making and “Cooling-off” periods," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1070-1083.
    2. Hinloopen, Jeroen & Müller, Wieland & Normann, Hans-Theo, 2014. "Output commitment through product bundling: Experimental evidence," European Economic Review, Elsevier, vol. 65(C), pages 164-180.
    3. Müller, Wieland & Tan, Fangfang, 2013. "Who acts more like a game theorist? Group and individual play in a sequential market game and the effect of the time horizon," Games and Economic Behavior, Elsevier, vol. 82(C), pages 658-674.

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