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Competitive behavior in market games: Evidence and theory

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  • Duffy, John
  • Matros, Alexander
  • Temzelides, Ted

Abstract

We explore whether competitive outcomes arise in an experimental implementation of a market game, introduced by Shubik (1973) [21]. Market games obtain Pareto inferior (strict) Nash equilibria, in which some or possibly all markets are closed. We find that subjects do not coordinate on autarkic Nash equilibria, but favor more efficient Nash equilibria in which all markets are open. As the number of subjects participating in the market game increases, the Nash equilibrium they achieve approximates the associated competitive equilibrium of the underlying economy. Motivated by these findings, we provide a theoretical argument for why evolutionary forces can lead to competitive outcomes in market games.

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  • Duffy, John & Matros, Alexander & Temzelides, Ted, 2011. "Competitive behavior in market games: Evidence and theory," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1437-1463, July.
    • Handle: RePEc:eee:jetheo:v:146:y:2011:i:4:p:1437-1463
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    6. Duersch, Peter & Oechssler, Jörg & Schipper, Burkhard C., 2010. "Pure Saddle Points and Symmetric Relative Payoff Games," Working Papers 0500, University of Heidelberg, Department of Economics.
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    8. Barreda-Tarrazona, Iván & García-Gallego, Aurora & Georgantzís, Nikolaos & Ziros, Nicholas, 2018. "Market games as social dilemmas," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 435-444.
    9. Duersch, Peter & Oechssler, Joerg & Schipper, Burkhard C, 2010. "Pure Saddle Points and Symmetric Relative Payoff Games," MPRA Paper 20864, University Library of Munich, Germany.
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    11. Dickson, Alex & Hartley, Roger, 2011. "Trade in bilateral oligopoly with endogenous market formation," SIRE Discussion Papers 2011-12, Scottish Institute for Research in Economics (SIRE).
    12. Jiang, Janet Hua & Puzzello, Daniela & Zhang, Cathy, 2021. "How long is forever in the laboratory? Three implementations of an infinite-horizon monetary economy," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 278-301.
    13. Dmitry Levando, 2012. "A Survey Of Strategic Market Games," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 57(194), pages 63-106, July - Se.
    14. John Duffy & Daniela Puzzello, 2022. "The Friedman Rule: Experimental Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 671-698, May.
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    18. Athreya, Kartik B., 2014. "Big Ideas in Macroeconomics: A Nontechnical View," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262019736, December.
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