IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/80515.html
   My bibliography  Save this paper

Entry in Beauty-Contest Games

Author

Listed:
  • Sanchez Villalba, Miguel
  • Martinez Gorricho, Silvia

Abstract

We study how voluntary participation in Beauty Contest Games (BCGs) affects the actions and payoffs of type-heterogenous players. In a BCG, players have two goals --one personal, the other social-- and so BCGs appropriately model relevant economic situations like participating in a social network, partaking in the coding of an open-source software, or the choice of research topics by academics, among others. Key in these and other cases is the concept of "social norm" that will emerge in the associated "community", and so people's entry choices will depend crucially on their expectations regarding not only how many but who (which types) will join in. We find that in equilibrium there is entry as long as the BCG is "attractive" and that there might be multiple equilibria, each indexed by its associated social norm. We also find that, when finite, there is an odd number of equilibria and that --if ordered based on the value of the associated social norm-- odd/even equilibria are stable/unstable. Further, for low attractiveness, equilibrium social norms are univocally associated with the extrema of the distribution of types in the economy, so that stable/unstable equilibria are linked to maxima/interior minima. We find that "universal" communities in which everybody joins the BCG (as implicitly assumed by the literature) only occur when the BCG is sufficiently attractive and the economy's average type is not extreme. In non-universal communities, social norms are affected by the attractiveness of the BCG and the functional form of the distribution of types in the economy (especifically, its skewness around extrema). Attractiveness affects both the size and the composition of the community. Thus, an increase in attractiveness could lead both to the entry of new members and to the exit of some others.

Suggested Citation

  • Sanchez Villalba, Miguel & Martinez Gorricho, Silvia, 2017. "Entry in Beauty-Contest Games," MPRA Paper 80515, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:80515
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/80515/1/MPRA_paper_80515.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, vol. 88(3), pages 587-597, June.
    2. 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.
    3. Vincent P. Crawford & Miguel A. Costa-Gomes, 2006. "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 96(5), pages 1737-1768, December.
    4. Guth, Werner & Kocher, Martin & Sutter, Matthias, 2002. "Experimental 'beauty contests' with homogeneous and heterogeneous players and with interior and boundary equilibria," Economics Letters, Elsevier, vol. 74(2), pages 219-228, January.
    5. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
    6. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    7. Sanchez Villalba, Miguel, 2015. "Global inspection games," Journal of Public Economics, Elsevier, vol. 128(C), pages 59-72.
    8. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-1326, December.
    9. Martin J. Osborne & Al Slivinski, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 65-96.
    10. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1163-1188.
    11. Grosskopf, Brit & Nagel, Rosemarie, 2008. "The two-person beauty contest," Games and Economic Behavior, Elsevier, vol. 62(1), pages 93-99, January.
    12. Angelique Augereau & Shane Greenstein & Marc Rysman, 2004. "Coordination vs. Differentiation in a Standards War: 56K Modems," NBER Working Papers 10334, National Bureau of Economic Research, Inc.
    13. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    14. Gérard 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Beauty contest game; endogenous entry; social norms;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
    • Z1 - Other Special Topics - - Cultural Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:80515. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.