A Unified Approach to Comparative Statics Puzzles in Experiments

33 Pages Posted: 27 Mar 2008 Last revised: 28 Oct 2008

See all articles by Armin Schmutzler

Armin Schmutzler

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: July 1, 2007

Abstract

The paper shows that, in some important respects, the differences between the Nash equilibrium and competing concepts such as the quantal response equilibrium are smaller than they appear. I start from the observation that, in many experiments, parameter shifts that leave the Nash equilibrium unchanged affect behavior. I explain the direction of change with a heuristic structural approach, relying on properties such as strategic complementarities and increasing differences. I justify the approach using existing comparative statics results for the Nash equilibrium and new comparative statics results for the quantal response equilibrium. Further, I show that the experimental observations can also be rationalized by a model of adjustment to change that does not rely on any equilibrium concept. Finally, I relate the structural approach to equilibrium selection concepts.

Suggested Citation

Schmutzler, Armin, A Unified Approach to Comparative Statics Puzzles in Experiments (July 1, 2007). Available at SSRN: https://ssrn.com/abstract=1113827 or http://dx.doi.org/10.2139/ssrn.1113827

Armin Schmutzler (Contact Author)

University of Zurich - Department of Economics ( email )

Zürich, CH-8006
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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