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Making Sense of the Experimental Evidence on Endogenous Timing in Duopoly Markets

  • Santos-Pinto, Luís

The prediction of asymmetric equilibria with Stackelberg outcomes is clearly the most frequent result in the endogenous timing literature. Several experiments have tried to validate this prediction empirically, but failed to find support for it. By contrast, the experiments find that simultaneous-move outcomes are modal and that behavior in endogenous timing games is quite heterogeneous. This paper generalizes Hamilton and Slutsky’s (1990) endogenous timing games by assuming that players are averse to inequality in payoffs. I explore the theoretical implications of inequity aversion and compare them to the empirical evidence. I find that this explanation is able to organize most of the experimental evidence on endogenous timing games. However, inequity aversion is not able to explain delay in Hamilton and Slutsky’s endogenous timing games.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3142.

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Date of creation: 06 Feb 2006
Date of revision: 27 Apr 2007
Handle: RePEc:pra:mprapa:3142
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  1. Huck, Steffen & Müller, Wieland & Normann, Hans-Theo, 1999. "To commit or not to commit: Endogenous timing in experimental duopoly markets," SFB 373 Discussion Papers 1999,38, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  2. Miguel Fonseca & Wieland Müller & Hans-Theo Normann, 2006. "Endogenous timing in duopoly: experimental evidence," International Journal of Game Theory, Springer, vol. 34(3), pages 443-456, October.
  3. Kyle Bagwell, 1992. "Commitment and Observability in Games," Discussion Papers 1014, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Ellingsen, Tore, 1994. "On Flexibility in Oligopoly," SSE/EFI Working Paper Series in Economics and Finance 21, Stockholm School of Economics.
  5. Eric van Damme & Sjaak Hurkens, 1996. "Endogenous Stackelberg leadership," Economics Working Papers 190, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Robson, Arthur J, 1990. "Duopoly with Endogenous Strategic Timing: Stackelberg Regained," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 263-74, May.
  7. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  8. Saloner, Garth, 1987. "Cournot duopoly with two production periods," Journal of Economic Theory, Elsevier, vol. 42(1), pages 183-187, June.
  9. Giovanni Maggi, 1996. "Endogenous Leadership in a New Market," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 641-659, Winter.
  10. Muller, Wieland, 2006. "Allowing for two production periods in the Cournot duopoly: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 100-111, May.
  11. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July.
  12. Santos-Pinto, Luís, 2006. "Reciprocity, inequity-aversion, and oligopolistic competition," MPRA Paper 3143, University Library of Munich, Germany, revised 14 Apr 2007.
  13. Pal, Debashis, 1991. "Cournot duopoly with two production periods and cost differentials," Journal of Economic Theory, Elsevier, vol. 55(2), pages 441-448, December.
  14. Huck, Steffen & Muller, Wieland & Normann, Hans-Theo, 2001. "Stackelberg Beats Cournot: On Collusion and Efficiency in Experimental Markets," Economic Journal, Royal Economic Society, vol. 111(474), pages 749-65, October.
  15. Miguel Fonseca & Steffen Huck & Hans-Theo Normann, 2005. "Playing Cournot although they shouldn’t," Economic Theory, Springer, vol. 25(3), pages 669-677, 04.
  16. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
  17. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, June.
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