Markets for Contracts: Experiments Exploring the Compatibility of Games and Markets for Games

Abstract

The research explores the relationship between games and the economic environment in which the games might be embedded. The focus is on a market institution in which agents buy and sell rights to participate in a follow-on stage of strategic interaction. The central question posed concerns how two different types of processes, the game and the market, interact. The market converges to a competitive equilibrium that is consistent with the Nash equilibrium that obtains in the game, and the convergence of the market to a competitive equilibrium lags the convergence of behaviors in the game to a Nash equilibrium.

Keywords: compatibility of markets and games, simultaneous equilibration, dynamic adjustment processes, institutions

JEL Classification: C72, C90