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Sophisticated EWA Learning and Strategic Teaching in Repeated Games

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  • Camerer, Colin F.
  • Ho, Teck H.
  • Chong, Juin-Kuan.

Abstract

Most learning models assume players are adaptive (i.e., they respond only to their own previous experience and ignore others' payoff information) and that behavior is not sensitive to the way in which players are matched. Empirical evidence suggests otherwise. In this paper, we extend our adaptive experience-weighted attraction (EWA) learning model to capture sophisticated learning and strategic teaching in repeated games. The generalized model assumes that there is a mixture of adaptive learners and sophisticated players. Like before, an adaptive learner adjusts his behavior the EWA way. A sophisticated player however does not learn and rationally best-responds to her forecasts of all other behaviors. A sophisticated player can be either myopic or foresighted. A foresighted player develops multiple-period rather than single-period forecasts of others' behaviors and chooses to 'teach' the other players by choosing a strategy scenario that gives her the highest discounted net present value. Consequently a foresighted player can develop a reputation for herself by strategic teaching if she is matched with an adaptive player repeatedly. We estimate the model using data fromp-beauty contests and repeated entry-deterrence (chain-store) games. Overall, the results show that the generalized model is better than the adaptive EWA model in describing and predicting behavior. Including teaching also allows an empirical learning-based approach to reputation formation which is at least as plausible as the now-standard type-based approach, and is superior in predictive performance in four di®erent ways.

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Bibliographic Info

Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 1087.

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Date of creation: Apr 2000
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Publication status: Published:
Handle: RePEc:clt:sswopa:1087

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Citations

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Cited by:
  1. Andreas Nicklisch, 2011. "Learning strategic environments: an experimental study of strategy formation and transfer," Theory and Decision, Springer, vol. 71(4), pages 539-558, October.
  2. Kyle Hyndman & Antoine Terracol & Jonathan Vaksmann, 2010. "Strategic interactions and belief formation: An experiment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00607238, HAL.
  3. Maria Giovanna Devetag, 2002. "Coordination and information in critical mass games: an experimental study," CEEL Working Papers 0214, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  4. Battalio,R. & Samuelson,L. & Huyck,J. van, 1998. "Risk dominance, payoff dominance and probabilistic choice learning," Working papers 2, Wisconsin Madison - Social Systems.
  5. Antoine Terracol & Jonathan Vaksmann, 2007. "Dumbing down rational players : learning and teaching in an experimental game," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00145436, HAL.
  6. Colin Camerer & Teck-Hua Ho & Juin Kuan Chong, 2003. "A cognitive hierarchy theory of one-shot games: Some preliminary results," Levine's Bibliography 506439000000000495, UCLA Department of Economics.
  7. Teck H. Ho & Noah Lim & Colin Camerer, 2005. "Modeling the Psychology of Consumer and Firm Behavior with Behavioral Economics," Levine's Bibliography 784828000000000476, UCLA Department of Economics.
  8. Brock, W.A. & Dindo, P.D.E. & Hommes, C.H., 2005. "Adaptive Rational Equilibrium with Forward Looking Agents, fortcoming in International Journal of Economic Theory (IJET) 2006, special issue in honor of Jean-Michel Grandmont," CeNDEF Working Papers 05-15, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  9. Christos A. Ioannou & Julian Romero, 2012. "Strategic Learning With Finite Automata Via The EWA-Lite Model," Purdue University Economics Working Papers 1269, Purdue University, Department of Economics.
  10. Martin G. Kocher & Matthias Sutter, 2004. "The Decision Maker Matters: Individual versus Group Behaviour in Experimental Beauty-Contest Games," Papers on Strategic Interaction 2004-09, Max Planck Institute of Economics, Strategic Interaction Group.
  11. Robert Slonim, 2005. "Competing Against Experienced and Inexperienced Players," Experimental Economics, Springer, vol. 8(1), pages 55-75, April.
  12. Stefania Bortolotti & Giovanna Devetag & Andreas Ortmann, 2009. "Exploring the effects of real effort in a weak-link experiment," CEEL Working Papers 0901, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  13. Michèle Belot & Raymond Duch & Luis Miller, 2010. "Who should be called to the lab? A comprehensive comparison of students and non-students in classic experimental games," Discussion Papers 2010001, University of Oxford, Nuffield College.
  14. Teck H Ho & Colin Camerer & Juin-Kuan Chong, 2003. "Functional EWA: A one-parameter theory of learning in games," Levine's Working Paper Archive 506439000000000514, David K. Levine.

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