Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/182020
Authors: 
Kirman, Alan P.
Laisney, François
Pezanis-Christou, Paul
Year of Publication: 
2018
Series/Report no.: 
ZEW Discussion Papers 18-038
Abstract: 
The paper reports on market-entry experiments that manipulate both payoff structures and payoff levels to assess two stationary models of behaviour: Exploration vs Exploitation (EvE, which is equivalent to Quantal Response Equilibrium) and Impulse Balance Equilibrium (IBE). These models explain the data equally well in terms of goodness-of-fit whenever the observed probability of entry is less than the symmetric Nash equilibrium prediction; otherwise IBE marginally outperforms EvE. When assuming agents playing symmetric strategies, and estimating the models with session data, IBE yields more theory-consistent estimates than EvE, no matter the payoff structure or level. However, the opposite occurs when the symmetry assumption is relaxed. The conduct of a specification test rejects the validity of the restrictions on entry probabilities imposed by EvE for agents with symmetric strategies, in 50 to 75% of sessions and it always rejects it in the case of IBE, which indicates that the symmetric variant of these models has little empirical support.
Subjects: 
congestion games
exploration vs exploitation
quantal response equilibrium
impulse balance equilibrium
specification test
experimental economics
JEL: 
C7
C92
Document Type: 
Working Paper
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