Who Acts More Like a Game Theorist? Group and Individual Play in a Sequential Market Game and the Effect of the Time Horizon

Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2011-15

34 Pages Posted: 17 Oct 2011 Last revised: 5 Sep 2013

See all articles by Fangfang Tan

Fangfang Tan

Tilburg University - Department of Economics

Wieland Müller

University of Vienna, Department of Economics & VCEE; Tilburg University, Department of Economics & CentER

Date Written: May 2, 2013

Abstract

Previous experimental results on one-shot sequential two-player games show that group decisions are closer to the subgame-perfect Nash equilibrium than individual decisions. We extend the analysis of inter-group versus inter-individual decision making by running both one-shot and repeated sessions of a simple two-player sequential market game (Stackelberg duopoly). Whereas in the one-shot markets we …find no significant differences in the behavior of groups and individuals, in the repeated markets we …find that the behavior of groups is further away from the subgame-perfect equilibrium of the stage game than that of individuals. To a large extent, this result is independent of the method of eliciting choices (sequential or strategy method), the matching protocol (random or …fixed matching), and the econometric method used to account for observed …first- and second-mover behavior. We discuss various possible explanations for the differential effect the time horizon of interaction has on the extent of individual and group players’(non)conformity with subgame perfectness.

Keywords: Stackelberg market, groups versus individuals, discontinuity effect, experiment

JEL Classification: C72, C92, L13

Suggested Citation

Tan, Fangfang and Müller, Wieland, Who Acts More Like a Game Theorist? Group and Individual Play in a Sequential Market Game and the Effect of the Time Horizon (May 2, 2013). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2011-15 . Available at SSRN: https://ssrn.com/abstract=1945196 or http://dx.doi.org/10.2139/ssrn.1945196

Fangfang Tan (Contact Author)

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands
+49 89 24246 5252 (Phone)
+49 89 24246 5299 (Fax)

HOME PAGE: http://www.tax.mpg.de/en/pub/public_economics/public_economics_people/fangfang_tan.cfm

Wieland Müller

University of Vienna, Department of Economics & VCEE ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

HOME PAGE: http://https://homepage.univie.ac.at/wieland.mueller/

Tilburg University, Department of Economics & CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/w.mueller-3.htm

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