Understanding Entry Games using Laboratory Experiments

Abstract

This laboratory experiment examines behavior in the two-player one-shot complete information entry game of Bresnahan and Reiss (1990) while varying payoff parameters. This entry game is regularly used in empirical industrial organization, but has not been examined experimentally. We find that subjects regularly play dominant strategies (98.2% on average), however there are violations of iterated dominance (13.6% on average). We find more coordination in regions of multiple equilibrium when there are payoff asymmetries (67.3% on average) compared to payoff symmetry (38.4% on average). We also find behavior is monotonic with respect to own and opponent’s payoffs.

(joint with John Rehbeck – Submitted)

Mir Adnan Mahmood

Economist, Bates White Economic Consulting

I am an Economist at Bates White Economic Consulting. I received my PhD in Economics from The Ohio State University.