Relaxing the symmetry assumption in participation games: a specification test for cluster-heterogeneity

Alan Kirman, Francois Laisney and Paul Pezanis-Christou

Experimental Economics, 2023, vol. 26, issue 4, No 5, 850-878

Abstract: Abstract We propose a novel approach to check whether individual behaviour in binary-choice participation games is consistent with the restrictions imposed by symmetric models. This approach allows in particular an assessment of how much cluster-heterogeneity a symmetric model can tolerate to remain consistent with its behavioural restrictions. We assess our approach with data from market-entry experiments which we analyse through the lens of ‘Exploration versus Exploration’ (EvE, which is equivalent to Logit-QRE) or of Impulse Balance Equilibrium (IBE). We find that when the symmetry assumption is imposed, both models are typically rejected when assuming pooled data and IBE yields more data-consistent estimates than EvE, i.e., IBE’s estimates of session and pooled data are more consistent than those of EvE. When relaxing symmetry, EvE (IBE) is rejected for 17% (42%) of the time. Although both models support cluster-heterogeneity, IBE is much less likely to yield over-parametrised specifications and insignificant estimates so it outperforms EvE in accommodating a model-consistent cluster-heterogeneity. The use of regularisation procedures in the estimations partially addresses EvE’s shortcomings but leaves our overall conclusions unchanged.

Keywords: Participation games; Exploration versus Exploitation; Logit-Quantal Response Equilibrium; Impulse Balance Equilibrium; Cluster-heterogeneity; Specification test; Regularized minimum distance estimation; Experiments (search for similar items in EconPapers)
JEL-codes: C7 C92 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10683-023-09797-8

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