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
Date Written: May 2, 2013
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: Suggested Citation