An Experimental Study of Coordination and Learning in Iterated Two-Market Entry Games

Posted: 7 Oct 2000

See all articles by Amnon Rapoport

Amnon Rapoport

University of Arizona - Eller College of Management

Darryl A. Seale

University of Nevada, Las Vegas

Eyal Winter

Hebrew University of Jerusalem - Department of Economics

Abstract

Tacit coordination in large groups is studied in an iterated market entry game with complete information and multiple market capacities that are varied randomly from period to period. On each period, each player must decide independently whether to enter any of the markets, and if entering, which of the two markets to enter. Across symmetric and asymmetric markets, we find remarkable coordination on the aggregate level, which is accounted for by the Nash equilibrium, together with considerable individual differences in frequency of entry and decision rules. With experience, the decisions of most players converge to decision rules with cutoff values on the combined market capacity that determine whether or not to enter but not which of the two markets to enter. This latter decision is determined probabilistically by the differential market capacities. The aggregate and individual results are accounted for quite well by a reinforcement-based learning model that combines deterministic and probabilistic elements.

Keywords: Market Entry Games, Coordination Success, Large Groups, Adaptive Learning, Nash Equilibrium Solution

JEL Classification: C72, C92, D83

Suggested Citation

Rapoport, Amnon and Seale, Darryl A. and Winter, Eyal, An Experimental Study of Coordination and Learning in Iterated Two-Market Entry Games. Available at SSRN: https://ssrn.com/abstract=239396

Amnon Rapoport (Contact Author)

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-9325 (Phone)
520-621-4171 (Fax)

Darryl A. Seale

University of Nevada, Las Vegas ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

Eyal Winter

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 658 4154 (Phone)
+972 2 651 3681 (Fax)

HOME PAGE: http://www.ma.huji.ac.il/%7Emseyal/

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