Do Opponents' Experience Matter? Experimental Evidence from a Quantity Precommitment Game

Chloe Le Coq and Jon-Thor Sturluson
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Jon-Thor Sturluson: Institute of Economic Studies, University of Iceland, Postal: Aragata 14, 107 Reykjavik, Iceland

No 531, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

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 (search for similar items in EconPapers)
JEL-codes: C92 L13 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2003-05-28, Revised 2011-11-10
New Economics Papers: this item is included in nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Does opponents’ experience matter? Experimental evidence from a quantity precommitment game (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0531

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