Hostname: page-component-7b9c58cd5d-9klzr Total loading time: 0 Render date: 2025-03-15T02:10:33.262Z Has data issue: false hasContentIssue false
  • English
  • Français

Tacit Coordination in a Decentralized Market Entry Game with Fixed Capacity

Published online by Cambridge University Press:  14 March 2025

Rami Zwick  and
Amnon Rapoport
Rami Zwick*
Affiliation:
Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong, People's Republic of China
Amnon Rapoport*
Affiliation:
Department of Management and Policy, University of Arizona, Tucson, AZ 85721
*
email: [email protected]
email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

We focus on a class of market entry games in which a newly emergent market opportunity may be fruitfully exploited by no more than a commonly known, exogenously determined number of firms. Our results show significant effects of the parameters manipulated in the study, namely, the market capacity, entry fee, and method of subject assignment to groups (fixed vs. random). In contrast to previous market entry games with linear payoff functions, we find no evidence of convergence to equilibrium play on the aggregate level. Shifting the focus of the analysis from the aggregate to the individual level, four clusters of subjects are identified. The patterns are: (1) choice of the same action that is independent of the parameters of the game or the outcome of previous presentations of the same game; (2) random choices with probabilities prescribed by the equilibrium solution for risk-neutral players; (3) random choices with probabilities equal to the individual observed overall proportion of entry; and (4) sequential dependencies that violate any model that assumes randomization. Subjects in the fourth and largest category are shown to adjust their choices in accordance with a simple principle of strategic reasoning.

Keywords

coordinationmarket entry gameexperimentNash equilibrium

JEL classification

C92: Laboratory, Group Behavior C72: Noncooperative Games
Type
Research Article
Information
Experimental Economics , Volume 5 , Issue 3 , December 2002 , pp. 253 - 272
Copyright
Copyright © 2002 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Camerer, C.F. and Ho, T.H. (1999). “Experience-Weighted Attraction Learning in Games.” Econometrica. 56, 1–36.CrossRefGoogle Scholar
Camerer, C.F. and Lovallo, D. (1999). “Overconfidence and Excess Entry.” American Economic Review. 89, 306–318.CrossRefGoogle Scholar
Clark, K. and Sefton, M. (1999). “Matching Protocols in Experimental Games.” School of Economic Studies Discussion Paper, University of Manchester.Google Scholar
Cooper, R.D. (1999). Coordination in Games: Complementarities and Macroeconomics. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Cooper, R.D., DeJong, D., Forsythe, R., and Ross, T. (1990). “Selection Criteria in Coordination Games: Some Experimental Results.” American Economic Review. 80, 218–233.Google Scholar
Cooper, R.D., DeJong, D., Forsythe, R., and Ross, T. (1994). “Alternative Institutions for Resolving Coordination Problems: Experimental Evidence on Forward Induction and Prepaly Communication.” In Friedman, J.W. (ed.), Problems of Coordination in Economic Activity. Boston: Kluwer.Google Scholar
Duffy, J. and Hopkins, E. (2001). “Learning, Information and Sorting in Market Entry Games: Theory and Evidence.” University of Pittsburgh, Department of Economics. Unpublished manuscript.Google Scholar
Erev, I. and Rapoport, A. (1998). “Coordination, “Magic,” and Reinforcement Learning in a Market Entry Game.” Games and Economic Behavior. 23, 145–176.CrossRefGoogle Scholar
Feltovich, N. (2000). “Reinforcement-Based vs. Belief-Based Learning Models in Experimental Asymmetric- Information Games.” Econometrica. 68, 605–641.CrossRefGoogle Scholar
Ledyard, J.O. (1995). “Public Goods: A Survey of Experimental Research.” In Kagel, J.H. and Roth, A.E. (eds.), The Handbook of Experimental Economics. Princeton: Princeton University Press, pp. 111–194.CrossRefGoogle Scholar
Lucas, R.E. Jr. (1986). “Adaptive Behavior and Economic Theory.” In Hogarth, R.M. and Reder, M.W. (eds.), Rational Choice: The Contrast between Economics and Psychology. Chicago: University of Chicago Press, pp. 217–242.Google Scholar
Margolin, B.H. (1988). “Test for Trends in Proportions.” In Kotz, S. and Johnson, N.L. (eds.), Encyclopedia of Statistical Sciences. New York: Wiley, Vol. 9.Google Scholar
McKelvey, R.D. and Palfrey, T.R. (1995). “Quantal Response Equilibria for Normal form Games.” Experimental Economics. 1, 9–42.CrossRefGoogle Scholar
Meyer, D.J., van Huck, J., Battalio, R., and Saving, T. (1992). “History's Role in Coordinating Decentralized Allocation Decisions: Laboratory Evidence on Repeated Binary Allocation Games.” Journal of Political Economy. 100, 292–316.CrossRefGoogle Scholar
Ochs, J. (1990). “The Coordination Problem in Decentralized Markets: An Experiment.” Quarterly Journal of Economics. 105, 545–559.CrossRefGoogle Scholar
Ochs, J. (1995). “Coordination Problems.” In Kagel, J.H. and Roth, A.E. (eds.), Handbook of Experimental Economics. Princeton: Princeton University Press, pp. 195–251.CrossRefGoogle Scholar
Ochs, J. (1999). “Coordination in Market Entry Games.” In Budescu, D.V., Erev, I., and Zwick, R. (eds.), Games and Human Behavior: Essays in Honor of Amnon Rapoport. Mahwah, NJ: Erlbaum, pp. 143–172.Google Scholar
Rapoport, A., Seale, D.A., Erev, I., and Sundali, J.A. (1998). “Equilibrium Play in Large Group Market Entry Games.” Management Science. 44, 129–141.CrossRefGoogle Scholar
Roth, A.E. and Erev, I. (1995). “Learning in Extensive-Form Games: Experimental Data and Simple Dynamic Models in the Intermediate Term.” Games and Economic Behavior. 8, 164–212.CrossRefGoogle Scholar
Sefton, M. (1999). “A Model of Behavior in Coordination Game Experiments.” Experimental Economics. 2, 151–164.CrossRefGoogle Scholar
Schelling, T. (1960). The Strategy of Conflict. Cambridge, MA: Harvard University Press.Google Scholar
Stahl, D.O., Haruvy, E., and Wilson, P. (in press). “Modeling and Testing for Heterogeneity in Observed Strategic Behavior.” Review of Economics and Statistics.Google Scholar
Sundali, J.A., Rapoport, A., and Seale, D.A. (1995). “Coordination in Market Entry Games with Symmetric Players.” Organizational Behavior and Human Decision Processes. 64, 203–218.CrossRefGoogle Scholar
van Huyck, J.B., Battalio, R.C., and Beil, R.O. (1990). “Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure.” American Economic Review. 80, 234–249.Google Scholar
van Huyck, J.B., Battalio, R.C., and Beil, R.O. (1991). “Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games.” Quarterly Journal of Economics. 106, 885–910.CrossRefGoogle Scholar