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Teaching Nash Equilibrium and Strategy Dominance: A Classroom Experiment on the Beauty Contest

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Abstract

The aim of this investigation is to display how the use of classroom experiments may be a good pedagogical tool to teach the Nash equilibrium (NE) concept. The basic game for our purposes is a repeated version of the Beauty Contest Game (BCG), a simple guessing game whose repetition lets students react to other players’ choices and to converge iteratively to the equilibrium solution. We performed this experiment with undergraduate students without any previous knowledge about game theory. After four rounds, we observed in all groups a clear decreasing tendency in the average chosen number. So, our findings prove that, by playing a repeated BCG, students quickly learn how to reach the NE solution.

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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2003/47.

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Length: 31 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:cea:doctra:e2003_47

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Keywords: Classroom Experiments; Beauty Contest Game; Teaching; Nash Equilibrium.;

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  1. Duffy, John & Nagel, Rosemarie, 1997. "On the Robustness of Behaviour in Experimental "Beauty Contest" Games," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(445), pages 1684-1700, November.
  2. Shinichi Hirota & Shyam Sunder, 2002. "Stock Market as a 'Beauty Contest': Investor Beliefs and Price Bubbles sans Dividend Anchors," Yale School of Management Working Papers, Yale School of Management ysm2, Yale School of Management.
  3. Brit Grosskopf & Rosemarie Nagel, 2007. "Rational reasoning or adaptive behavior? Evidence from two-person beauty contest games," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1068, Department of Economics and Business, Universitat Pompeu Fabra.
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Cited by:
  1. Virtudes Alba-Fernández & Pablo Brañas-Garza & Francisca Jiménez-Jiménez & Javier Rodero-Cosano, 2004. "Communication, coordination and competition in the beauty contest game: Eleven classroom experiments," IESA Working Papers Series, Institute for Social Syudies of Andalusia - Higher Council for Scientific Research 0416, Institute for Social Syudies of Andalusia - Higher Council for Scientific Research.

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