Please use this identifier to cite or link to this item:
https://hdl.handle.net/2440/138178
Type: | Working paper |
Title: | Exploration vs Exploitation, impulse balance equilibrium and a specification test for the el farol bar problem |
Author: | Kirman, A. Laisney, F. Pezanis-Christou, P. |
Publisher: | School of Economics, The University of Adelaide |
Issue Date: | 2018 |
Series/Report no.: | School of Economics Working Papers; 2018-11 |
ISSN: | 2203-6024 |
Statement of Responsibility: | Alan Kirman, François Laisney, Paul Pezanis-Christou |
Abstract: | The paper reports on market-entry experiments that manipulate both payoff structures and payoff levels to assess two stationary models of behaviour: Exploration vs Exploitation (EvE, which is equivalent to Quantal Response Equilibrium) and Impulse Balance Equilibrium (IBE). These models explain the data equally well in terms of goodness-of-fit whenever the observed probability of entry is less than the symmetric Nash equilibrium prediction; otherwise IBE marginally outperforms EvE. When assuming agents playing symmetric strategies, and estimating the models with session data, IBE yields more theory-consistent estimates than EvE, no matter the payoff structure or level. However, the opposite occurs when the symmetry assumption is relaxed. The conduct of a specification test rejects the validity of the restrictions on entry probabilities imposed by EvE for agents with symmetric strategies, in 50 to 75% of sessions and it always rejects it in the case of IBE, which indicates that the symmetric variant of these models have little empirical support. |
Keywords: | congestion games; exploration vs exploitation; quantal response equilibrium; impulse balance equilibrium; specification test; experimental economics |
Rights: | Copyright the authors |
Grant ID: | http://purl.org/au-research/grants/arc/DP140102949 |
Published version: | https://econpapers.repec.org/paper/adlwpaper/2018-11.htm |
Appears in Collections: | Economics Working papers |
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