SSE/EFI Working Paper Series in Economics and Finance
No 531:
Do Opponents' Experience Matter? Experimental Evidence from a Quantity Precommitment Game
Chloé Le Coq ()
and Jon-Thor Sturluson
Abstract: This paper investigates why subjects in laboratory
experiments on quantity precommitment games consistently choose capacities
above the Cournot level - the subgame-perfect equilibrium. We argue that
this puzzling regularity may be attributed to players' perceptions of their
opponents' skill or level of rationality. In our experimental design, we
use the level of experience (the number of periods played) as a proxy for
the level of rationality and match subjects with different levels of
experience. We first find evidence of capacity choices decreasing, and
prices increasing, with the opponent's experience. Futhermore, we
investigate the observed behavioural patterns by using the agent-form
quantal response equilibrium model by McKelvey and Palfrey (1998). In
particular, this framework takes into account any interaction between a
player's own experience and that of his opponent. We show how the
predictions of this theoretical framework fit well with the experimental
data.
Keywords: Oligopoly; Quantity precommitment; Experience; Rationality; (follow links to similar papers)
JEL-Codes: C92; L13; (follow links to similar papers)
36 pages, May 28, 2003, Revised November 10, 2011
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