Sequential Equilibrium in Monotone Games: Theory-Based Analysis of Experimental Data∗

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 ∗This research was supported by the Center for Experimental Social Sciences (C.E.S.S.) and the C. V. Starr Center for Applied Economics at New York University. We thank Tom Palfrey for detailed comments and suggestions. We also thank an associate editor and two anonymous referees for their comments. The paper has benefited from suggestions by the participants of seminars at several universities, the AEA 2007 annual meeting in Chicago, the ESA Asia-Pacific Regional Meeting at Osaka, and the Cowles Foundation Workshop on Coordination Games at Yale. For financial support, Gale acknowledges National Science Foundation for support under Grant No. SBR-0095109 and the C. V. Starr Center for Applied Economics at New York University, and Kariv thanks UC Berkeley for support under a COR Grant. Kariv is grateful for the hospitality of the School of Social Science in the Institute for Advances Studies. †Department of Economics, University College London, Gower Street, London WC1E 6BT, UK (Email: [email protected], URL: http://www.homepages.ucl.ac.uk/~uctpsc0). ‡Department of Economics, New York University, 269 Mercer Street, #507, New York, NY, 10003 (E-mail: [email protected], URL: http://www.econ.nyu.edu/user/galed). §Department of Economics, University of California, Berkeley, 549 Evans Hall # 3880, Berkeley, CA 94720, USA (E-mail: [email protected], URL: http://socrates.berkeley.edu/~kariv/).