Learning from peers in signaling game experiments
Article first published online: 2 JUN 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 27, Issue 7, pages 1037–1058, November/December 2012
How to Cite
Liu, X., Kagel, J. H. and Lee, L.-F. (2012), Learning from peers in signaling game experiments. J. Appl. Econ., 27: 1037–1058. doi: 10.1002/jae.1253
- Issue published online: 27 NOV 2012
- Article first published online: 2 JUN 2011
- Manuscript Revised: 31 MAR 2011
- Manuscript Received: 6 NOV 2008
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.