An Experimental Test of the Robustness and the Power of Forward Induction

Quazi Shahriar

Managerial and Decision Economics, 2014, vol. 35, issue 4, 264-277

Abstract: Existing experimental studies tested the forward induction (FI) prediction, an equilibrium selection criterion, in a battle‐of‐the‐sexes game and found limited support due to a confounding focal point. The focal point arises from an asymmetrically offered outside option in the first stage of the game. The robustness of FI to different first‐stage asymmetries, however, is still unknown. To investigate this issue, the paper sheds light on the interplay of FI and (i) payoff asymmetries and (ii) endogenously generated asymmetries (in a game that is initially fully symmetric). The results from a laboratory experiment confirm the robustness and power of the FI prediction. Copyright © 2013 John Wiley & Sons, Ltd.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:35:y:2014:i:4:p:264-277

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