Risk Dominance Selects the Leader: An Experimental Analysis

摘要

We perform an experimental analysis to test whether the risk dominance prediction issupported by the behavior of laboratory agents, in a 2X 2 coordination game whoseequilibria are not Pareto ranked. This type of game arises very often in studies of industrial organization and international trade, and we extract the parameters for the experiment from a vertical product differentiation model with two asymmetric players choosing first qualitiesand then prices.We show that the higher the degree of asymmetry of the game, the higherthe predictive power of the risk dominance criterion.