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Who Acts More Like a Game Theorist? Group and Individual Play in a Sequential Market Game and the Effect of the Time Horizon

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  • Wieland Mueller
  • Fangfang Tan

Abstract

Previous experimental results on one-shot sequential two-player games show that group decisions are closer to the subgame-perfect Nash equilbirum than individual decisions. We extend the analysis of inter-group versus inter-individual decision making to a Stackelberg market game, by running both one-shot and repeated markets. Whereas in the one-shot markets we find no significant differences in the behavior of groups and individuals, we find that the behavior of groups is further away from the subgame-perfect equilibrium of the stage game than that of individuals. To a large extent, this result is independent of the method of eliciting choices (sequential or strategy method) and the method used to account for observed first- and second-mover behavior. We provide evidence on followers' response functions and electronic chats to offer an explanation for the differential effect that the time horizon of interaction has on the extent of individual and group players (non)conformity with subgame perfectness.

Suggested Citation

  • Wieland Mueller & Fangfang Tan, 2011. "Who Acts More Like a Game Theorist? Group and Individual Play in a Sequential Market Game and the Effect of the Time Horizon," Working Papers who_acts_more_like_a_game, Max Planck Institute for Tax Law and Public Finance.
    • Handle: RePEc:mpi:wpaper:who_acts_more_like_a_game_theorist
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    More about this item

    Keywords

    Stackelberg market; groups versus individuals; discontinuity effect; experiment;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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