Rationalizing Irrational Beliefs
AbstractIn this paper, we re-examine various previous experimental studies of the Centipede Game in the literature. These experiments found that players rarely follow the subgame-perfect equilibrium strategies of the game, and various modifications to the game were proposed to explain the outcomes of the experiments. We here offer yet another modification. Players have a choice of whether or not to believe that their opponents use subgame-perfect equilibrium strategies. We define a `behavioral equilibrium' for this game. This equilibrium concept can reproduce the outcomes of those experiments.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1033.
Length: 11 pages
Date of creation: Feb 2006
Date of revision:
centipede games; game theory; experimental economics; behavioral economics;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-05 (All new papers)
- NEP-CBE-2006-03-05 (Cognitive & Behavioural Economics)
- NEP-EVO-2006-03-05 (Evolutionary Economics)
- NEP-EXP-2006-03-05 (Experimental Economics)
- NEP-GTH-2006-03-05 (Game Theory)
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