Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/206571
Authors: 
Choo, Lawrence
Zhou, Xiaoyu
Year of Publication: 
2019
Series/Report no.: 
FAU Discussion Papers in Economics 08/2019
Abstract: 
We use an experiment to study whether market competition can reduce anomalous behaviour in games. In different treatments, we employ two alternative mechanisms, the random mechanism and the auction mechanism, to allocate the participation rights to the red hat puzzle game, a well-known logical reasoning problem. Compared to the random mechanism, the auction mechanism significantly reduces deviations from the equilibrium play in the red hat puzzle game. Our findings show that under careful conditions, market competition can indeed reduce anomalous behaviour in games.
Subjects: 
market competition
market selection hypothesis
auctions
bounded-rationality
red hat puzzle
JEL: 
C70
C90
D44
Document Type: 
Working Paper
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