We consider the interaction between an incumbent firm and a potential entrant, and examine how this interaction is affected by demand fluctuations. Our model gives rise to procyclical entry, prices, and price-cost margins, although the average price in the market can be countercyclical if the...

We examine the strategic behavior of leaders and followers in sequential duopoly experiments in which followers either perfectly observe the leaders' actions or else observe nothing. (...)

The assumption that decision makers choose actions to maximize their preferences is a central tenet in economics. This assumption is often justified either formally or informally by appealing to evolutionary arguments. In contrast, this paper shows that in almost every game, payoff maximization...