Experimental Investigation of a Cyclic Duopoly Game

Abstract

The notion of a cyclic game has been introduced by Selten and Wooders (2001). They illustrate the concept by the analysis of a cyclic  duopoly game. The experiments reported concern this game. The game was played by eleven matching groups of six players each. The observed choice fre- quencies were compared with the predictions of Nash equilibrium, impulse balance equilibrium (Selten, Abbink and Cox (2005), Selten and Chmura (2007)) and two-sample equilbrium (Osborne and Rubinstein(1998)). Pair- wise comparisons by the Wilcoxon Signed-rank test show that impulse balance equilibrium as well as two-sample equilibrium have a significantly better predictive success than Nash equilibrium. The difference between impulse balance equilibrium and two-sample equilibrium is not   significant.In each matching group three players acted only in uneven periods and   the other three only in even periods. This game has two pure strategy equi- libria in which both types of players behave differently. The data exhibit a weak but significant tendency in the direction of coordination at a   pure strategy equilibrium.cyclic game duopoly experiment, impulse balance equilibrium, two-sample equilibrium