Risk Dominance Selects the Leader. An Experimental Analysis

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dc.contributor.author Cabrales, Antonio
dc.contributor.author García-Fontes, Walter
dc.contributor.author Motta, Massimo
dc.date.accessioned 2009-01-27T12:05:59Z
dc.date.available 2009-01-27T12:05:59Z
dc.date.issued 1997
dc.identifier.uri http://hdl.handle.net/10016/3505
dc.description.abstract Coordination games arise very often in studies of industrial organization and international trade. This type of games has multiple strict equilibria, and therefore the identification of testable predictions is very difficult. We study a vertical product differentiation model with two asymmetric players choosing first qualities and then prices. This game has two equilibria for some parameter values. However, we apply the risk dominance criterion suggested by Harsanyi and Selten and show that it always selects the equilibrium where the leader is the firm having some initial advantage. We then perform an experimental analysis to test whether the risk dominance prediction is supported by the behaviour of laboratory agents. We show that the probability that the risk dominance prediction is right depends crucially on the degree of asymmetry of the game. The stronger the asymmetries the higher the predictive power of the risk dominance criterion.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Universidad Pompeu Fabra. Departmento de Economía y Empresa
dc.relation.ispartofseries Working Papers;
dc.relation.ispartofseries 1997
dc.rights openAccess
dc.title Risk Dominance Selects the Leader. An Experimental Analysis
dc.type workingPaper
dc.relation.publisherversion http://www.econ.upf.edu/docs/papers/downloads/222.pdf
dc.subject.eciencia Economía
dc.rights.accessRights openAccess
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