Implementation by Iterative Dominance and Backward Induction: An Experimental Comparison

Posted: 1 Sep 2004

See all articles by Abdullah Yavas

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Martin Sefton

University of Nottingham - School of Economics

Elena Katok

University of Texas at Dallas

Abstract

We report experimental results on the relative performance of simultaneous and sequential versions of the Abreu-Matsushima mechanism. Under the simultaneous version subjects typically use undominated strategies, but apply only a limited number of iterations of dominance. Consequently the unique strategy surviving iterative elimination of strictly dominated strategies is rarely observed. Under the sequential version, subjects also typically use undominated strategies, but apply only a limited number of steps of backward induction. Thus the backward induction outcome is also rarely observed. The sequential version results in fewer observed outcomes corresponding to the predicted outcome than the simultaneous version.

Keywords: Abreu-Matsushima mechanism, backward induction, experimental economics

JEL Classification: C72, C92

Suggested Citation

Yavas, Abdullah and Sefton, Martin and Katok, Elena, Implementation by Iterative Dominance and Backward Induction: An Experimental Comparison. Journal of Economic Theory, Vol. 104, pp. 89-103, 2002. Available at SSRN: https://ssrn.com/abstract=584282

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Martin Sefton (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Elena Katok

University of Texas at Dallas ( email )

Jindal School of Management
800 W. Campbell Dr.
Richardson, TX 75080
United States

HOME PAGE: http://www.utdallas.edu/~ekatok/

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