Publication: Risk Dominance Selects the Leader: An Experimental Analysis
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Publication date
2000
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Tutors
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Publisher
Elsevier
Abstract
We perform an experimental analysis to test whether the risk dominance prediction is
supported by the behavior of laboratory agents, in a 2X 2 coordination game whose
equilibria are not Pareto ranked. This type of game arises very often in studies of industrial organization and international trade, and we extract the parameters for the experiment from a vertical product differentiation model with two asymmetric players choosing first qualities
and then prices.We show that the higher the degree of asymmetry of the game, the higher
the predictive power of the risk dominance criterion.
Description
Keywords
Risk dominance, Coordination game, Vertical product differentiation, Asymmetric players
Bibliographic citation
International Journal of Industrial Organization. 2000, vol.18, nº. 1, p. 137-162