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Equilibrium Play in Large Group Market Entry Games

  • Amnon Rapoport

    (Department of Management and Policy, University of Arizona, Tucson, Arizona 85721-0001)

  • Darryl A. Seale

    (Department of Management and Marketing, College of Administrative Science, University of Alabama, Huntsville, Alabama 35899)

  • Ido Erev

    (Technion, Israel Institute of Technology, Haifa 3200, Israel)

  • James A. Sundali

    (Kent State University, Kent, Ohio 44242)

Coordination behavior is studied experimentally in a class of noncooperative market entry games featuring symmetric players, complete information, zero entry costs, and several randomly presented values of the market capacity. Once the market capacity becomes publicly known, each player must decide privately whether to enter the market and receive a payoff, which increases linearly in the difference between the market capacity and the number of entrants, or stay out. Payoffs for staying out are either positive, giving rise to the domain of gains, or negative, giving rise to the domain of losses. The major findings are substantial individual differences that do not diminish with practice, aggregate behavior that is organized extremely well in both the domains of gains and losses by the Nash equilibrium solution, and variations in the population action strategies with repeated play of the stage game that are accounted for by a variant of an adaptive learning model due to Roth and Erev (1995).

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File URL: http://dx.doi.org/10.1287/mnsc.44.1.119
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 44 (1998)
Issue (Month): 1 (January)
Pages: 119-141

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Handle: RePEc:inm:ormnsc:v:44:y:1998:i:1:p:119-141
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  1. GĂ©rard P. Cachon & Colin F. Camerer, 1996. "Loss-Avoidance and Forward Induction in Experimental Coordination Games," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 165-194.
  2. J. B. Van Huyck & R. C. Battalio & R. O. Beil, 2010. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 661465000000000393, David K. Levine.
  3. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  4. Jeffrey S. Banks & Charles R. Plott & David P. Porter, 1988. "An Experimental Analysis of Unanimity in Public Goods Provision Mechanisms," Review of Economic Studies, Oxford University Press, vol. 55(2), pages 301-322.
  5. Crawford, Vincent P, 1995. "Adaptive Dynamics in Coordination Games," Econometrica, Econometric Society, vol. 63(1), pages 103-43, January.
  6. Gary-Bobo, Robert J., 1990. "On the existence of equilibrium points in a class of asymmetric market entry games," Games and Economic Behavior, Elsevier, vol. 2(3), pages 239-246, September.
  7. John B. Van Huyck & Raymond C. Battalio & Richard O. Beil, 1991. "Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 885-910.
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