On the Existence of Predatory Pricing: An Experimental Study of Reputation and Entry Deterrence in the Chain-Store Game

Jung, Younghun; Kagel, John H.; Levin, Dan

doi:10.2307/2555854

Cited by 112 publications

(69 citation statements)

References 17 publications

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“…One aspect of our results that differs substantially from the early studies of reputation, in particular Camerer and Weigelt (1988) and Jung et al (1994), is that -to the extent that they found results in line with the sequential equilibrium prediction -many repetitions or experienced subjects were needed. In our experiment, subjects displayed mimicking behavior from the early periods.…”

Section: Recognizing the Role Of Reputationcontrasting

confidence: 99%

“…Although there is quite some evidence from market entry games that aggregate behavior tends to converge to the (mixedstrategy) Nash equilibrium predictions (for example Erev and Rapoport 1998, Rapoport et al 2000, Duffy and Hopkins 2005, a number of studies (such as Shachat 2002) have noted that subjects find mixed strategies difficult to implement at an individual level. Camerer and Weigelt (1988) and Jung et al (1994), who find support for the sequential equilibrium in their studies of reputation, also report evidence that subjects do not mix in the correct proportions. 44 Consequently, it is not too surprising to find deviations with respect to these details.…”

Section: Remaining Deviations and Extensions Of The Theorymentioning

confidence: 94%

“…However, reputation building in our experiments will not 14 See Neral and Ochs (1992), Brandts and Figueras (2003) and Grosskopf and Sarin (2010). Jung et al (1994) use a similar design but test the chain store game. Tests of the repeated trust game also include Engle- Warnick and Slonim (2004).…”

Section: Related Experimental Literaturementioning

confidence: 99%

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Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioural Types

Embrey

Fréchette

Lehrer

2014

The Review of Economic Studies

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Article (Accepted Version) http://sro.sussex.ac.uk Embrey, Matthew, Fréchette, Guillaume R and Lehrer, Steven F (2015) Bargaining and reputation: an experiment on bargaining in the presence of behavioural types. Review of Economic Studies, 82 (2). pp. This version is available from Sussex Research Online: http://sro.sussex.ac.uk/57995/ This document is made available in accordance with publisher policies and may differ from the published version or from the version of record. If you wish to cite this item you are advised to consult the publisher's version. Please see the URL above for details on accessing the published version. Copyright and reuse:Sussex Research Online is a digital repository of the research output of the University.Copyright and all moral rights to the version of the paper presented here belong to the individual author(s) and/or other copyright owners. To the extent reasonable and practicable, the material made available in SRO has been checked for eligibility before being made available.Copies of full text items generally can be reproduced, displayed or performed and given to third parties in any format or medium for personal research or study, educational, or not-for-profit purposes without prior permission or charge, provided that the authors, title and full bibliographic details are credited, a hyperlink and/or URL is given for the original metadata page and the content is not changed in any way. AbstractWe conduct a series of laboratory experiments to understand what role commitment and reputation play in bargaining. The experiments implement the Abreu and Gul (2000) bargaining model that demonstrates how introducing behavioral types, which are obstinate in their demands, creates incentives for all players to build reputations for being hard bargainers. The data are qualitatively consistent with the * We wish to thank Jim Andreoni, Colin Camerer, John Kagel, Muriel Niederle, Tom Palfrey, Ennio Stacchetti, Leeat Yariv and three anonymous referees, as well as seminar participants at Caltech, Maastricht University, New York University, Royal Holloway, Universitat Autonòma de Barcelona, Università Bocconi, University of Michigan and University of Texas-Austin, and the ESA Asia-Pacific meetings, ESA North American meetings, the FSU Workshop on Experimental Game Theory, the Stony Brook Game Theory Festival, and the SITE Conference on Experimental Economics for helpful comments and suggestions that improved the paper. We thank Raj Advani, Samuel Mati and Anwar Ruff for software development, and Jacopo Perego, Tobias Salz, Chloé Tergiman, Séverine Toussaert and Sevgi Yuksel for research assistance. Fréchette and Lehrer respectively wish to thank the NSF (grants SES-0519045, SES-0721111, SES-0924780, and SES-1225779), CV Starr Center, Center for Experimental Social Science (CESS) and SSHRC for research support. We are responsible for all errors. 1 theory, as subjects mimic induced types. Furthermore, we find evidence for the presence of complementary types, whose initial demands acquiesce to in...

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Section: Recognizing the Role Of Reputationcontrasting

confidence: 99%

Section: Remaining Deviations and Extensions Of The Theorymentioning

confidence: 94%

See 1 more Smart Citation

Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioural Types

Embrey

Fréchette

Lehrer

2014

The Review of Economic Studies

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“…More recently, Dal Bó (2005) finds experimental evidence that greater cooperation occurs in an indefinitely repeated prisoner's dilemma with the same expected length as a finitely repeated control and Dal Bó and Frechette (2011) find evidence that subgame perfection is a necessary (but not sufficient) condition in supporting cooperation in an indefinitely repeated prisoners' dilemma. 3 Jung, Kagel, and Levin (1994) analyze the sequential equilibrium of a chain-store game that shared some features with Camerer and Weigelt's borrower-lender game and also find discrepancies with the theory that cannot be resolved with 4…”

Section: Related Literaturementioning

confidence: 99%

Revealed reputations in the finitely repeated prisoners’ dilemma

et al. 2015

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. (2015) 'Revealed reputations in the nitely-repeated prisoners' dilemma.', Economic theory., 58 (3). pp. 441-484. Further information on publisher's website:http://dx.doi.org/10.1007/s00199-015-0863-1Publisher's copyright statement:The nal publication is available at Springer via http://dx.doi.org/10.1007/s00199-015-0863-1. Additional information:Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-pro t purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Abstract In a sequential-move, finitely-repeated prisoners' dilemma game (FRPD), cooperation can be sustained if the first-mover believes her opponent might be a behavioral type who plays a tit-for-tat strategy in every period. We test this theory by revealing second-mover histories from an earlier FRPD experiment to their current opponent. Despite eliminating the possibility of reputation building, aggregate cooperation actually increases when histories are revealed. Cooperative histories lead to increased trust, but negative histories do not cause decreased trust. We develop a behavioral model to explain these findings.

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“…They only sometimes reach a monopoly position. Jung et al (1994) use a different, very stylized design with weak and strong types of incumbent monopolists. Weak monopolists have an incentive to pretend to be strong in order to deter entry in the long run.…”

Section: Introductionmentioning

confidence: 99%

Strategic Buyers and Market Entry

Bruttel¹,

Glöckner²

2011

Journal of Competition Law and Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper tests two basic assumptions underlying court made or statutory provisions prohibiting predatory pricing. Such prohibitions are usually based on the economic grounds that monopolistic pricing is likely to occur in the long run, causing harm to competition and consumers. The first assumption under scrutiny is that customers will accept monopolistic prices during the subsequent phase of recoupment, even though they have become accustomed to low prices during the price war. The second assumption is that no competitor will (re-)enter the market in this subsequent phase. Our two experiments indicate that both assumptions are not backed up by actual decision making both of consumers and of competitors. Moreover, we find that consumers use their market power in order to maintain long-run competition. Terms of use: Documents in EconStor mayJEL classification: C91, D21, L11.Keywords: Buyer Power, Predatory Pricing, Recoupment, Experiment. * We thank seminar participants in Konstanz and Tilburg for very helpful suggestions. We are particularly grateful to Wieland Müller for his comments on an earlier version of this paper.Philipp Wahlen and Ruben Lingenfelser provided excellent research support.

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On the Existence of Predatory Pricing: An Experimental Study of Reputation and Entry Deterrence in the Chain-Store Game

Cited by 112 publications

References 17 publications

Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioural Types

Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioural Types

Revealed reputations in the finitely repeated prisoners’ dilemma

Strategic Buyers and Market Entry

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