Competing for market shares: Does the order of moves matter even when it shouldn’t?

This paper investigates whether the order of moves affects behavior and outcomes even in the absence of material incentives for pre-commitment. Evidence from laboratory experiments with shared rents, symmetric players and either a simultaneous or a sequential move order suggests that it is an inherent advantage to move second rather than first. The reason is that first movers face strategic uncertainty, while second movers have the power to ultimately determine the outcome through their investment choices. Many first movers acknowledge this power and decrease investments below the standard prediction which is interpreted as an attempt to collude. This strategy leads to higher absolute payoffs for the first-movers compared to a situation where they do not try to establish collusion. However, relative payoffs are low since collusive outcomes are typically asymmetric to the advantage of the second mover.