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Availability of Information and Representation Effects in the Centipede Game

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  • Paolo Crosetto

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena)

  • Marco Mantovani

    ()
    (Université Libre de Bruxelles, and DEMM, Università degli studi di Milano, and CEREC, Facultés Universitaires Saint-Louis)

Abstract

The 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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File URL: http://pubdb.wiwi.uni-jena.de/pdf/wp_2012_051.pdf
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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-051.

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Date of creation: 11 Sep 2012
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Handle: RePEc:jrp:jrpwrp:2012-051

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Keywords: Centipede; Backward Induction; Representation effects;

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  1. Zauner, Klaus G., 1999. "A Payoff Uncertainty Explanation of Results in Experimental Centipede Games," Games and Economic Behavior, Elsevier, vol. 26(1), pages 157-185, January.
  2. repec:feb:artefa:0097 is not listed on IDEAS
  3. Steven D. Levitt & John A. List & Sally E. Sadoff, 2009. "Checkmate: Exploring Backward Induction Among Chess Players," NBER Working Papers 15610, National Bureau of Economic Research, Inc.
  4. Duffy, Sean & Smith, John, 2012. "Cognitive load in the multi-player prisoner's dilemma game," MPRA Paper 35906, University Library of Munich, Germany.
  5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  6. Cappelletti, Dominique & Güth, Werner & Ploner, Matteo, 2011. "Being of two minds: Ultimatum offers under cognitive constraints," Journal of Economic Psychology, Elsevier, vol. 32(6), pages 940-950.
  7. Giovanna Devetag & Massimo Warglien, 2002. "Games and Phone Numbers: Do Short Term Memory Bounds Affect Strategy Behavior?," ROCK Working Papers 018, Department of Computer and Management Sciences, University of Trento, Italy, revised 13 Jun 2008.
  8. Giovanni Ponti, . "Cycles Of Learning In The Centipede Game," ELSE working papers 024, ESRC Centre on Economics Learning and Social Evolution.
  9. Ignacio Palacios-Huerta & Oscar Volij, . "Field Centipedes," Economic theory and game theory 020, Oscar Volij.
  10. Rapoport, Amnon & Stein, William E. & Parco, James E. & Nicholas, Thomas E., 2003. "Equilibrium play and adaptive learning in a three-person centipede game," Games and Economic Behavior, Elsevier, vol. 43(2), pages 239-265, May.
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