Availability of Information and Representation Effects in the Centipede Game
AbstractThe paper presents the results of a novel experiment testing the effects of environment complexity on strategic behavior, using a centipede game. Behavior in the centipede game has been explained either by appealing to failures of backward induction or by calling for preferences that induce equilibria consistent with observed behavior. By manipulating the way in which information is provided to subjects we show that reduced availability of information is sufficient to shift the distribution of take-nodes further from the equilibrium prediction. On the other hand, similar results are obtained in a treatment where reduced availability of information is combined with an attempt to elicit preferences for reciprocity, through the presentation of the centipede as a repeated trust game. Our results could be interpreted as cognitive limitations being more effective than preferences in determining (shifts in) behavior in our experimental centipede. Furthermore our results are at odds with the recent ones in Cox and James (2012), suggesting caution in generalizing their results. Reducing the availability of information may hamper backward induction or induce myopic behavior, depending on the strategic environment.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-051.
Date of creation: 11 Sep 2012
Date of revision:
Centipede; Backward Induction; Representation effects;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-22 (All new papers)
- NEP-CBE-2012-09-22 (Cognitive & Behavioural Economics)
- NEP-EVO-2012-09-22 (Evolutionary Economics)
- NEP-GTH-2012-09-22 (Game Theory)
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