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Testing Models of Strategic Uncertainty: Equilibrium Selection in Repeated Games

Vespa, Emanuel and Weidman, Taylor and Wilson, Alistair (2021) Testing Models of Strategic Uncertainty: Equilibrium Selection in Repeated Games. Working Paper. UNSPECIFIED. (Unpublished)

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In repeated-game applications where both the collusive and non-collusive outcomes can be supported as equilibria, researchers must resolve underlying selection questions if theory will be used to understand counterfactual policies. One guide to selection, based on clear theoretical underpinnings, has shown promise in predicting when collusive outcomes will emerge in controlled repeated-game experiments. In this paper we both expand upon and experimentally test this model of selection, and its underlying mechanism: strategic uncertainty. Adding an additional source of strategic uncertainty (the number of players) to the more-standard payoff sources, we stress test the model. Our results affirm the model as a tool for predicting when tacit collusion is likely/unlikely to be successful. Extending the analysis, we corroborate the mechanism of the model. When we remove strategic uncertainty through an explicit coordination device, the model no longer predicts the selected equilibrium.


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Item Type: Monograph (Working Paper)
Status: Unpublished
CreatorsEmailPitt UsernameORCID
Vespa, Emanuel
Weidman, Taylortaw79@pitt.edutaw79
Wilson, Alistairalistair.wilson@pitt.edualistair0000-0001-8118-2376
Monograph Type: Working Paper
Date: January 2021
Date Type: Completion
Institution: University of Pittsburgh
Department: Economics
Schools and Programs: Dietrich School of Arts and Sciences > Economics
Refereed: No
Date Deposited: 09 Nov 2021 21:38
Last Modified: 09 Nov 2021 21:38


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