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Learning from peers in signaling game experiments
Author(s) -
Liu Xiaodong,
Kagel John H.,
Lee LungFei
Publication year - 2011
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.1253
Subject(s) - discrete choice , limit (mathematics) , peer effects , estimation , econometric model , econometrics , panel data , computer science , economics , group (periodic table) , maximum likelihood , econometric analysis , microeconomics , mathematical economics , statistics , mathematics , psychology , social psychology , management , mathematical analysis , organic chemistry , chemistry
SUMMARY We investigate peer group effects in laboratory experiments based on Milgrom and Roberts' (1982, Econometrica 50 : 443–459) entry limit pricing game. We generalize Heckman's (1981, in Structural Analysis of Discrete Data with Econometric Applications . MIT Press: Cambridge, MA) dynamic discrete‐choice panel data models by introducing time‐lagged social interactions, using the unbiased GHK simulator to implement the computationally cumbersome maximum likelihood estimation. We find that subjects' decisions are significantly influenced by past decisions of peers on several dimensions, including potential entrants' choices and strategic play of like‐type monopolists. The proposed model and estimation method may be applicable to other experiments where peer group effects are likely to play an important role. Copyright © 2011 John Wiley & Sons, Ltd.