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Equilibrium Play in Large Group Market Entry Games

Author

Listed:
  • 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)

Abstract

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).

Suggested Citation

  • Amnon Rapoport & Darryl A. Seale & Ido Erev & James A. Sundali, 1998. "Equilibrium Play in Large Group Market Entry Games," Management Science, INFORMS, vol. 44(1), pages 119-141, January.
  • Handle: RePEc:inm:ormnsc:v:44:y:1998:i:1:p:119-141
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    File URL: http://dx.doi.org/10.1287/mnsc.44.1.119
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Giovanna Devetag & Francesca Pancotto & Thomas Brenner, 2011. "The Minority Game Unpacked: Coordination and Competition in a Team-based Experiment," LEM Papers Series 2011/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Kets, W., 2007. "The Minority Game : An Economics Perspective," Discussion Paper 2007-53, Tilburg University, Center for Economic Research.
    3. Fischbacher, Urs & Thöni, Christian, 2008. "Excess entry in an experimental winner-take-all market," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 150-163, July.
    4. Jordi Brandts & Gary Charness, 2011. "The strategy versus the direct-response method: a first survey of experimental comparisons," Experimental Economics, Springer;Economic Science Association, vol. 14(3), pages 375-398, September.
    5. Gunnthorsdottir, Anna & Rapoport, Amnon, 2006. "Embedding social dilemmas in intergroup competition reduces free-riding," Organizational Behavior and Human Decision Processes, Elsevier, vol. 101(2), pages 184-199, November.
    6. Ehud Guttel & Barak Medina, 2007. "Less Crime, More (Vulnerable) Victims: Game Theory and the Distributional Effects of Criminal Sanctions," Discussion Paper Series dp472, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    7. Emmanuel Dechenaux & Shakun Mago & Laura Razzolini, 2014. "Traffic congestion: an experimental study of the Downs-Thomson paradox," Experimental Economics, Springer;Economic Science Association, vol. 17(3), pages 461-487, September.
    8. Gunnthorsdottir, Anna & Vragov, Roumen & Mccabe, Kevin, 2007. "The meritocracy as a mechanism to overcome social dilemmas," MPRA Paper 2454, University Library of Munich, Germany.
    9. Ehud Guttel & Barak Medina, 2007. "Less Crime, More (Vulnerable) Victims: Game Theory and the Distributional Effects of Criminal Sanctions," Levine's Bibliography 122247000000001799, UCLA Department of Economics.
    10. Sabrina Artinger & Thomas C. Powell, 2016. "Entrepreneurial failure: Statistical and psychological explanations," Strategic Management Journal, Wiley Blackwell, vol. 37(6), pages 1047-1064, June.
    11. Ryan Oprea & Bart J. Wilson & Arthur Zillante, 2013. "War Of Attrition: Evidence From A Laboratory Experiment On Market Exit," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 2018-2027, October.
    12. Duffy, John & Hopkins, Ed, 2005. "Learning, information, and sorting in market entry games: theory and evidence," Games and Economic Behavior, Elsevier, vol. 51(1), pages 31-62, April.
    13. Płatkowski, Tadeusz & Ramsza, Michał, 2003. "Playing minority game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 323(C), pages 726-734.
    14. Wilfred Amaldoss & Sanjay Jain, 2005. "Conspicuous Consumption and Sophisticated Thinking," Management Science, INFORMS, vol. 51(10), pages 1449-1466, October.
    15. Schade, Christian & Schroeder, Andreas & Krause, Kai Oliver, 2010. "Coordination after gains and losses: Is prospect theory’s value function predictive for games?," Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers 59524, Humboldt University Berlin, Department of Agricultural Economics.
    16. Linde, Jona & Sonnemans, Joep & Tuinstra, Jan, 2014. "Strategies and evolution in the minority game: A multi-round strategy experiment," Games and Economic Behavior, Elsevier, vol. 86(C), pages 77-95.
    17. Crawford, Vincent P., 2017. "Let׳s talk it over: Coordination via preplay communication with level-k thinking," Research in Economics, Elsevier, vol. 71(1), pages 20-31.
    18. Kuechle, Graciela, 2011. "Persistence and heterogeneity in entrepreneurship: An evolutionary game theoretic analysis," Journal of Business Venturing, Elsevier, vol. 26(4), pages 458-471, July.
    19. Giulio Bottazzi & Giovanna Devetag, 2007. "Competition and coordination in experimental minority games," Journal of Evolutionary Economics, Springer, vol. 17(3), pages 241-275, June.
    20. Matthias Mahlendorf, 2015. "Allowance for failure: reducing dysfunctional behavior by innovating accountability practices," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(3), pages 655-686, August.
    21. Rapoport, Amnon & Stein, William E. & Parco, James E. & Seale, Darryl A., 2004. "Equilibrium play in single-server queues with endogenously determined arrival times," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 67-91, September.
    22. Duffy, John & Kim, Minseong, 2005. "Anarchy in the laboratory (and the role of the state)," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 297-329, March.
    23. Artinger, Sabrina & Schade, Christian, 2013. "Girls will be Girls: An Experimental Study on Female Entrepreneurship," Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers 146511, Humboldt University Berlin, Department of Agricultural Economics.
    24. Jacob K. Goeree & Charles A. Holt, 2000. "An Explanation of Anomalous Behavior in Binary-Choice Games: Entry, Voting, Public Goods, and the Volunteers' Dilemma," Virginia Economics Online Papers 328, University of Virginia, Department of Economics.

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