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Title: An experimental study of coordination and learning in iterated two-market entry games
Authors: Rapoport, Amnon
Seale, Darryl A.
Winter, Eyal
Keywords: Tacit coordination
Market entry game
Nash equilibrium
Cutoff rules
Reinforcement-based learning model
Issue Date: 6-Jun-1998
Series/Report no.: Marketing Working Paper Series ; MKTG 98.116
Abstract: Tacit coordination in large groups is studied experimentally in an iterated market entry game with complete information and multiple market capacities that are varied randomly from period to period. On each period, each player must decide independently whether to enter any of the markets, and if entering, which of the markets to enter. Across symmetric and asymmetric markets, we find remarkable coordination on the aggregate level, which is accounted for by the Nash equilibrium, together with considerable individual differences in frequency of entry and decision rules. With experience, the decisions of most of the subjects converge to cutoff rules with cutoff values on the combined market capacity that determine whether or not to enter but not which of the markets to enter. Both the aggregate and individual results are accounted for quite well by a reinforcement-based learning model that combines deterministic and probabilistic elements.
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