Coordination and Learning Behavior in Large Groups with Asymmetric Players

We study a class of large-group, noncooperative, iterated market entry games with complete information, binary choices, and asymmetric players in which the incentive of each player to enter the market decreases the larger the number of entrants. Experimental results from two different studies show remarkable coordination on the aggregate level, which is accounted for successfully by the Nash equilibrium solution. The equilibrium solution is less successful in accounting for the differences among types of players with differential entry costs or differences among players of the same type. Rather, the behavioral patterns observed on the aggregate level are accounted for by a reinforcement-based learning model postulating an initial distribution of individual cutoff points. These cutoff points are assumed to change over time, at a decreasing rate, as a joint function of the decision and outcome of the preceding period. Journal of Economic Literature Classification Numbers: C7, D5, D8.  2002 Elsevier Science (USA)