Inequality Aversion Dominates Competitive Behavior in Dynamic Sequential Duopolies

• Author(s) / Creator(s)

  • Kecinski, Maik

• This study introduces a two-period sequential choice model, which is tested in controlled laboratory experiments. Players have a one time opportunity to invest positive relative profits to lower marginal cost and gain competitive advantage. Theory predicts one sub-game perfect Nash equilibrium in pure strategies with first movers earning much larger payoffs than second movers. On the contrary, experimental results show that Cournot play is modal. Participants appear to be inequality averse, which was brought on by either a fear of punishment or pure preferences for equal pay.

• Date created

  2018-01-01

• Subjects / Keywords

  • Repeated Games
  • Laboratory Experiments
  • Stackelberg Equilibrium
  • Competitive Advantage
  • Inequality Aversion
  • Punishment

• Type of Item

  Report

• DOI

  https://doi.org/10.7939/r3-rscs-2854

• License

  Attribution-NonCommercial 4.0 International