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Finite Mixture Analysis of Beauty-Contest Data Using Generalised Beta Distributions

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  • Antoni Bosch-Domènech
  • José G.Montalvo
  • Rosemarie Nagel and Albert Satorra

Abstract

This paper introduces a mixture model based on the beta distribution, without preestablished means and variances, to analyze a large set of Beauty-Contest data obtained from diverse groups of experiments (Bosch-Dom`enech et al. 2002). This model gives a better fit of the experimental data, and more precision to the hypothesis that a large proportion of individuals follow a common pattern of reasoning, described as iterated best reply (degenerate), than mixture models based on the normal distribution. The analysis shows that the means of the distributions across the groups of experiments are pretty stable, while the proportions of choices at different levels of reasoning vary across groups.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 455.

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Date of creation: May 2010
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Handle: RePEc:bge:wpaper:455

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Keywords: Beauty-Contest experiments; decision theory; reasoning hierarchy; finite mixture distribution; beta distribution; EM algorithm;

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References

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  1. Antoni Bosch-Dom�nech & Jos� G. Montalvo & Rosemarie Nagel & Albert Satorra, 2002. "One, Two, (Three), Infinity, ...: Newspaper and Lab Beauty-Contest Experiments," American Economic Review, American Economic Association, vol. 92(5), pages 1687-1701, December.
  2. Andersen, Steffen & Harrison, Glenn W. & Hole, Arne Risa & Rutström, Elisabet E., 2009. "Non-Linear Mixed Logit and the Characterization of Individual Heterogeneity," Working Papers 06-2009, Copenhagen Business School, Department of Economics.
  3. Stahl, Dale O., 1998. "Is step-j thinking an arbitrary modelling restriction or a fact of human nature?," Journal of Economic Behavior & Organization, Elsevier, vol. 37(1), pages 33-51, September.
  4. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
  5. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
  6. McDonald, James B. & Xu, Yexiao J., 1995. "A generalization of the beta distribution with applications," Journal of Econometrics, Elsevier, Elsevier, vol. 66(1-2), pages 133-152.
  7. Peter Arcidiacono & John Bailey Jones, 2003. "Finite Mixture Distributions, Sequential Likelihood and the EM Algorithm," Econometrica, Econometric Society, Econometric Society, vol. 71(3), pages 933-946, 05.
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Cited by:
  1. Wengström, Erik, 2007. "Setting the Anchor: Price Competition, Level-n Theory and Communication," Working Papers 2007:6, Lund University, Department of Economics.

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