THE STRATEGIES BEHIND THEIR ACTIONS: A METHOD TO INFER REPEATED-GAME STRATEGIES AND AN APPLICATION TO BUYER BEHAVIOR

Jim Engle-Warnick () and Bradley Ruffle

Departmental Working Papers from McGill University, Department of Economics

Abstract: We introduce a Bayesian method to infer repeted-game strategies in the form of if-then statements that best describe individuals' observed actions. We apply this method to buyer behavior in posted-offer market experiments. While the strategies of one-quarter of the buyers in our experiments correspond to the game-theoretic prediction of passive price-taking, for three-quarters of the buyers we infer repeated-game strategies that condition on time, price, and combinations of time and price. Our analysis fills a gap in a literature that studies the convergence of pricing behavior in posted-offer markets but has not addressed the market as a repeated game. We propose that strategy inference should at least complement existing methods of statistical inference on observed strategic behavior.

JEL-codes: C91 D42 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2006-09
New Economics Papers: this item is included in nep-exp, nep-gth and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:mcl:mclwop:2005-04

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