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Does opponents’ experience matter? Experimental evidence from a quantity precommitment game

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  • Le Coq, Chloé
  • Sturluson, Jon Thor

Abstract

This paper investigates why subjects in laboratory experiments on quantity precommitment games consistently choose capacities above the Cournot level – the subgame-perfect equilibrium. We argue that this puzzling regularity may be attributed to players’ perceptions of their opponents’ skill or level of rationality. We first show theoretically that it is the case by modelling a two-stage game of capacity investment and pricing with bounded rational players. We then design an experiment in which we use the level of experience as a proxy for the level of rationality and match subjects with different levels of experience. We find significant differences in behavior depending on opponents’ experience; moreover, players facing inexperienced players tend to choose higher capacities than they would otherwise.

Suggested Citation

  • Le Coq, Chloé & Sturluson, Jon Thor, 2012. "Does opponents’ experience matter? Experimental evidence from a quantity precommitment game," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 265-277.
  • Handle: RePEc:eee:jeborg:v:84:y:2012:i:1:p:265-277 DOI: 10.1016/j.jebo.2012.03.015
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    References listed on IDEAS

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    Cited by:

    1. Penczynski, Stefan P., 2016. "Strategic thinking: The influence of the game," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 72-84.
    2. Jacobs, Martin, 2016. "Number of firms, rationing, matching, and knowledge: A comprehensive study of variations in experimental Kreps-Scheinkman markets," Economics Working Papers 2016-02, Christian-Albrechts-University of Kiel, Department of Economics.

    More about this item

    Keywords

    Experience; Experiment; Oligopoly; Quantity precommitment; Rationality;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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