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Sequential equilibrium in monotone games: A theory-based analysis of experimental data

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  • Choi, Syngjoo
  • Gale, Douglas
  • Kariv, Shachar

Abstract

A monotone game is an extensive-form game with complete information, simultaneous moves and an irreversibility structure on strategies. It captures a variety of situations in which players make partial commitments and allows us to characterize conditions under which equilibria result in socially desirable outcomes. However, since the game has many equilibrium outcomes, the theory lacks predictive power. To produce stronger predictions, one can restrict attention to the set of sequential equilibria, or Markov equilibria, or symmetric equilibria, or pure-strategy equilibria. This paper explores the relationship between equilibrium behavior in a class of monotone games, namely voluntary contribution games, and the behavior of human subjects in an experimental setting. Several key features of the symmetric Markov perfect equilibrium (SMPE) are consistent with the data. To judge how well the SMPE fits the data, we estimate a model of Quantal Response Equilibrium (QRE) [R. McKelvey, T. Palfrey, Quantal response equilibria for normal form games, Games Econ. Behav. 10 (1995) 6-38; R. McKelvey, T. Palfrey, Quantal response equilibria for extensive form games, Exp. Econ. 1 (1998) 9-41] and find that the decision rules of the QRE model are qualitatively very similar to the empirical choice probabilities.

Suggested Citation

  • Choi, Syngjoo & Gale, Douglas & Kariv, Shachar, 2008. "Sequential equilibrium in monotone games: A theory-based analysis of experimental data," Journal of Economic Theory, Elsevier, vol. 143(1), pages 302-330, November.
  • Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:302-330
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    Cited by:

    1. Alfonso Rosa García & Hubert Janos Kiss & Ismael Rodríguez Lara, 2009. "Do social networks prevent bank runs?," Working Papers. Serie AD 2009-25, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Breitmoser, Yves, 2017. "Knowing Me, Imagining You:," Rationality and Competition Discussion Paper Series 36, CRC TRR 190 Rationality and Competition.
    3. Battaglini, Marco & Nunnari, Salvatore & Palfrey, Thomas R., 2012. "Legislative Bargaining and the Dynamics of Public Investment," American Political Science Review, Cambridge University Press, vol. 106(02), pages 407-429, May.
    4. Benjamin Golub & Matthew O. Jackson, 2010. "Naïve Learning in Social Networks and the Wisdom of Crowds," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 112-149, February.
    5. Breitmoser, Yves, 2015. "Knowing me, imagining you: Projection and overbidding in auctions," MPRA Paper 62052, University Library of Munich, Germany.
    6. Choi, Syngjoo & Gale, Douglas & Kariv, Shachar & Palfrey, Thomas, 2011. "Network architecture, salience and coordination," Games and Economic Behavior, Elsevier, vol. 73(1), pages 76-90, September.
    7. Freytag, Andreas & Güth, Werner & Koppel, Hannes & Wangler, Leo, 2014. "Is regulation by milestones efficiency enhancing? An experimental study of environmental protection," European Journal of Political Economy, Elsevier, vol. 33(C), pages 71-84.
    8. Sam Asher & Lorenzo Casaburi & Plamen Nikolov & Maoliang Ye, 2010. "One step at a time: Does gradualism build coordination?," Framed Field Experiments 00188, The Field Experiments Website.
    9. Breitmoser, Yves, 2010. "Structural modeling of altruistic giving," MPRA Paper 24262, University Library of Munich, Germany.
    10. Benjamin Ouvrard & Anne Stenger, 2017. "Nudging with heterogeneity in terms of environmental sensitivity : a public goods experiment in networks," Working Papers of BETA 2017-36, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    11. Tan, Jonathan H.W. & Breitmoser, Yves & Bolle, Friedel, 2015. "Voluntary contributions by consent or dissent," Games and Economic Behavior, Elsevier, vol. 92(C), pages 106-121.
    12. Steven A. Matthews, 2006. "Smooth Monotone Contribution Games," PIER Working Paper Archive 06-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    13. Marco Battaglini & Salvatore Nunnari & Thomas R. Palfrey, 2016. "The Dynamic Free Rider Problem: A Laboratory Study," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 268-308, November.
    14. Marco Battaglini & Salvatore Nunnari & Thomas Palfrey, 2011. "The Free Rider Problem: a Dynamic Analysis," Working Papers 1354, Princeton University, Department of Economics, Econometric Research Program..
    15. Kiss, Hubert Janos & Rodriguez-Lara, Ismael & Rosa-García, Alfonso, 2014. "Do social networks prevent or promote bank runs?," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 87-99.
    16. Yves Breitmoser, 2015. "Cooperation, but No Reciprocity: Individual Strategies in the Repeated Prisoner's Dilemma," American Economic Review, American Economic Association, vol. 105(9), pages 2882-2910, September.
    17. Matthew O. Jackson & Brian W. Rogers & Yves Zenou, 2016. "Networks: An Economic Perspective," Papers 1608.07901, arXiv.org.
    18. Steven A. Matthews, 2008. "Achievable Outcomes of Dynamic Contribution Games, Second Version," PIER Working Paper Archive 11-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 20 Jun 2011.
    19. Matthews, Steven A., 2013. "Achievable outcomes of dynamic contribution games," Theoretical Economics, Econometric Society, vol. 8(2), May.
    20. Robert Kurzban & Mary Rigdon & Bart Wilson, 2008. "Incremental approaches to establishing trust," Experimental Economics, Springer;Economic Science Association, vol. 11(4), pages 370-389, December.
    21. Steven A. Matthews, 2008. "Achievable Outcomes in Smooth Dynamic Contribution Games," PIER Working Paper Archive 08-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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