We study the impact of advice or observation on the depth of reasoning in an experimental beauty-contest game. Both sources of information trigger faster convergence to the equilibrium. Yet, we find that subjects who receive naïve advice outperform uninformed subjects permanently, whereas subjects who observe others’ past behavior before making their decision do only have a temporary advantage over uninformed subjects. We show in a simulation that the latter result is due to subjects failing to make the most out of observing others.
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Find related papers by JEL classification: C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
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