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An experimental study of coordination and learning in iterated two-market entry games

Listed author(s):
  • Eyal Winter

    (The Hebrew University of Jerusalem, Jerusalem, ISRAEL)

  • Amnon Rapoport


    (Department of Management and Policy, University of Arizona, 405 McClelland Hall, Tucson, AZ 85721, USA)

  • Darryl A. Seale

    (University of Nevada, Las Vegas, AZ 89154, USA)

Tacit coordination in large groups is studied in an iterated market entry game with complete information and multiple market capacities that are varied randomly from period to period. On each period, each player must decide independently whether to enter any of the markets, and if entering, which of the two markets to enter. Across symmetric and asymmetric markets, we find remarkable coordination on the aggregate level, which is accounted for by the Nash equilibrium, together with considerable individual differences in frequency of entry and decision rules. With experience, the decisions of most players converge to decision rules with cutoff values on the combined market capacity that determine whether or not to enter but not which of the two markets to enter. This latter decision is determined probabilistically by the differential market capacities. The aggregate and individual results are accounted for quite well by a reinforcement-based learning model that combines deterministic and probabilistic elements.

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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 16 (2000)
Issue (Month): 3 ()
Pages: 661-687

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Handle: RePEc:spr:joecth:v:16:y:2000:i:3:p:661-687
Note: Received: January 29, 1999; revised version: October 25, 1999
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