Decomposing First-Mover Advantage: A Decision-Making Perspective

Dainis Zegners, Ajay Bhaskarabhatla and Tobias Kretschmer

No 20448, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a theory of first-mover advantage (FMA) grounded in decision-making ability and error propensity. Our simulation model demonstrates how small initial advantages compound through systematic differences in error rates between first- and second-movers. We show that FMA amplifies when both competitors have higher decision-making ability and when abilities are closely matched, whereas FMA increases for low complexity of the decision-making environment but decreases for higher complexity. To test these predictions, we analyze 3.66 million chess games, exploiting quasi-random assignment of move order and objective ability measures. Results strongly support our theory: FMA increases from 3.5% for low-ability players to 11% for high-ability players, peaks when competitors are evenly matched, and strengthens in complex decision environments. Move-level analysis reveals second-movers make larger errors when operating from disadvantageous positions under complexity, explaining FMA persistence through compounding mistakes rather than resource advantages.

Date: 2025-07
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