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Sequential equilibrium in monotone games: theory-based analysis of experimental data

Choi, S.; Gale, D.; Kariv, S.; (2006) Sequential equilibrium in monotone games: theory-based analysis of experimental data. (ELSE Working Papers 232). ESRC Centre for Economic Learning and Social Evolution: London, UK. Green open access

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Abstract

A monotone game is an extensive-form game with complete information, simultaneous moves and an irreversibility structure on strategies. It captures a variety of situations in which players make partial commitments and allows us to characterize conditions under which equilibria result in socially desirable outcomes. However, since the game has many equilibrium outcomes, the theory lacks predictive power. To produce stronger predictions, one can restrict attention to the set of sequential equilibria, or Markov equilibria, or symmetric equilibria, or pure-strategy equilibria. This paper explores the relationship between equilibrium behavior in a class of monotone games, namely voluntary contribution games, and the behavior of human subjects in an experimental setting. We find evidence of both pure- and mixed-strategy equilibria and several key features of the symmetric Markov perfect equilibrium (SMPE) in the data. To judge how well the SMPE fits the data, we estimate a model of Quantal Response Equilibrium (QRE) (McKelvey and Palfrey 1995, 1998) and find that the decision rules of the QRE model are qualitatively very similar to the empirical choice probabilities.

Type: Working / discussion paper
Title: Sequential equilibrium in monotone games: theory-based analysis of experimental data
Open access status: An open access version is available from UCL Discovery
Publisher version: http://else.econ.ucl.ac.uk/newweb/papers.php#2006
Language: English
Additional information: Please also see http://eprints.ucl.ac.uk/12657/
Keywords: JEL classification: D82, D83, C92. Experiment, monotone games, equilibrium refinements, pure-strategy equilibrium, mixed-strategy equilibrium, symmetric equilibrium, Markov perfect equilibrium, quantal response equilibrium
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/14464
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