An experimental analysis of subgame perfect play: the entry deterrence game

Our experiments model a two-stage, two person non-cooperative game where su bjects face a sequence of potential entry situations. Payoffs and entry cos ts are common knowledge. The subgame perfect equilibrium entails player I c hoosing an entry barring output and player E not entering. While many subje cts played this way, a significant proportion of E players entered when it yielded negative net payoffs, and a non-trivial proportion of I players did n't seek deterrence. While these proportions fall over the course of the ex periment, such behavior persists through the final period. Past experience influences I subjects' tendencies to seek deterrence. (C) 1998 Elsevier Sci ence B.V. All rights reserved.