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Tacit Coordination in a Decentralized Market Entry Game with Fixed Capacity

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  • Rami Zwick

    (Hong Kong University of Science and Technology)

  • Amnon Rapoport

    (Hong Kong University of Science and Technology)

Abstract

Tacit coordination is studied experimentally in a class of iterated market entry games with a relatively small number of potential entrants (n = 6), symmetric players, and fixed entry fees. These games are intended to simulate a situation where a newly emergent market opportunity may be fruitfully exploited by no more than a fixed and commonly known number of firms. Our results indicate a high degree of sensitivity to the game parameters that are manipulated in the study, namely, the market capacity, entry fee, and method of subject assignment to groups (fixed vs. random), as well as sophisticated adaptation to actual and hypothetical changes in wealth level. We find no support for convergence to equilibrium play on either the aggregate or individual level or for any trend across rounds of play to maximize total group payoff by lowering the frequency of entry. The coordination failure is attributed to certain features of the payoff function that induce strong competition in the attempt to penetrate the market.

Suggested Citation

  • Rami Zwick & Amnon Rapoport, 1999. "Tacit Coordination in a Decentralized Market Entry Game with Fixed Capacity," Experimental 9903001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpex:9903001
    Note: Type of Document - Acrobat PDF; prepared on PC; to print on PostScript; pages: 42 ; figures: included
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    References listed on IDEAS

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    Cited by:

    1. Kets, W., 2007. "The Minority Game : An Economics Perspective," Discussion Paper 2007-53, Tilburg University, Center for Economic Research.
    2. Giovanna Devetag & Francesca Pancotto & Thomas Brenner, 2011. "The Minority Game Unpacked: Coordination and Competition in a Team-based Experiment," CEEL Working Papers 1102, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    3. Giulio Bottazzi & Giovanna Devetag, 2002. "Coordination and Self-Organization in Minority Games: Experimental Evidence," LEM Papers Series 2002/09, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    4. Louis, Philippos & Troumpounis, Orestis & Tsakas, Nikolas & Xefteris, Dimitrios, 2022. "Coordination with preferences over the coalition size," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 105-123.
    5. Linde, Jona & Gietl, Daniel & Sonnemans, Joep & Tuinstra, Jan, 2023. "The effect of quantity and quality of information in strategy tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 305-323.
    6. Alan Kirman & François Laisney & Paul Pezanis-Christou, 2023. "Relaxing the symmetry assumption in participation games: a specification test for cluster-heterogeneity," Experimental Economics, Springer;Economic Science Association, vol. 26(4), pages 850-878, September.
    7. Rami Zwick & Amnon Rapoport & Alison King Chung Lo, 2001. "Behavioral Strategies in Repeated Pure Coordination Games," Experimental 0110004, University Library of Munich, Germany.
    8. Pietro Dindo & Jan Tuinstra, 2011. "A Class of Evolutionary Models for Participation Games with Negative Feedback," Computational Economics, Springer;Society for Computational Economics, vol. 37(3), pages 267-300, March.
    9. Daniel Cracau & Abdolkarim Sadrieh, 2014. "The Divergent Effects of Long-Term and Short-Term Entry Investments on Home Market Cartels," FEMM Working Papers 140003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    10. Messinger, Paul R., 2016. "The role of fairness in competitive supply chain relationships: An experimental studyAuthor-Name: Choi, Sungchul," European Journal of Operational Research, Elsevier, vol. 251(3), pages 798-813.
    11. Kirman, Alan P. & Laisney, François & Pezanis-Christou, Paul, 2018. "Exploration vs exploitation, impulse balance equilibrium, and a specification test for the El Farol bar problem," ZEW Discussion Papers 18-038, ZEW - Leibniz Centre for European Economic Research.
    12. Yu Wang & Ernan Haruvy, 2013. "Tiers in One-Sided Matching Markets: Theory and Experimental Investigation," Management Science, INFORMS, vol. 59(6), pages 1458-1477, June.
    13. Liu, Jia & Riyanto, Yohanes E., 2019. "Liquidation policy and credit history in financial contracting: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 526-542.
    14. Dindo, P.D.E. & Tuinstra, J., 2006. "A Behavioral Model for Participation Games with Negative Feedback," CeNDEF Working Papers 06-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    15. Giovanna Devetag & Francesca Pancotto & Thomas Brenner, 2014. "The minority game unpacked:," Journal of Evolutionary Economics, Springer, vol. 24(4), pages 761-797, September.
    16. Sruthi Ashraf & Alexander L. Brown & Mark W. Burris & Valon Vitaku, 2023. "Aggregate and individual effects of information in a coordination (traffic) game," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 818-850, October.
    17. Kets, W., 2007. "The Minority Game : An Economics Perspective," Discussion Paper 2007-53, Tilburg University, Center for Economic Research.

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    More about this item

    Keywords

    Tacit Coordination; Market Entry Game; Experiment;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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