Ain't No Puzzle Anymore: Comparative Statics and Experimental Economics
41 Pages Posted: 8 Feb 2006
Date Written: February 2006
Many experimental studies deal with the comparison of two versions of one game for which agents' behavior is fundamentally different even though the Nash equilibrium is the same. This paper provides a novel approach to explain such findings. It uses the observation that many of these examples are games with strategic complementarities to predict the direction of change in response to suitable parameter changes, allowing for the possibility that the equilibrium remains unchanged as a boundary case. I show that the predictions derived in this fashion explain the experimental evidence very well. Further, I provide a behavioral justification of the approach, and I explore the relation to standard equilibrium selection theories.
Keywords: experiments, static complements, supermodularity, equilibrium selection, embedding method, increasing differences
JEL Classification: C72, C92
Suggested Citation: Suggested Citation