Snowball effect and traffic equilibrium in a market entry game: A laboratory experiment

Abstract

The Market Entry Game (Selten & Guth, 1982; Gary-Bobo, 1990) is a coordination game where average cost of entry increase linearly. Following the suggestion of Anderson et al. (2008) and empirical evidence in transport economics suggested by related literature about the Speed-Flow Relationship (Verhoef, 2005), we built a theoretical model of market entry game where congestion cost increases at an increasing rate when the flow of entrants grows (snowball MEG). The calibration of experimental parameters enables us to compare outcomes regarding Snowball MEG to a benchmark based on a usual linear MEG (calibration being the same as in Anderson et al., 2008). Then, we run an experiment where theoretical predictions for both models give comparable entry rate and add more or less the same properties. Moreover, we conduct variation about group size in order to assess size effect on coordination level. Basically, we find no significant difference between the aggregated entry rates in our snowball game compared to usual MEG. But size clearly matters, especially for issue regarding successful coordination for users in the snowball MEG.