Rational reasoning or adaptive behavior? Evidence from two-person beauty contest games
AbstractMany experiments have shown that human subjects do not necessarily behave in line with game theoretic assumptions and solution concepts. The reasons for this non-conformity are multiple. In this paper we study the argument whether a deviation from game theory is because subjects are rational, but doubt that others are rational as well, compared to the argument that subjects, in general, are boundedly rational themselves. To distinguish these two hypotheses, we study behavior in repeated 2-person and many-person Beauty- Contest-Games which are strategically different from one another. We analyze four different treatments and observe that convergence toward equilibrium is driven by learning through the information about the other player’s choice and adaptation rather than self-initiated rational reasoning.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1068.
Date of creation: Jun 2007
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Web page: http://www.econ.upf.edu/
Beauty contest; Guessing game; Bounded rationality; Weak dominance; Learning;
Find related papers by JEL classification:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-01 (All new papers)
- NEP-CBE-2008-03-01 (Cognitive & Behavioural Economics)
- NEP-EVO-2008-03-01 (Evolutionary Economics)
- NEP-EXP-2008-03-01 (Experimental Economics)
- NEP-GTH-2008-03-01 (Game Theory)
- NEP-UPT-2008-03-01 (Utility Models & Prospect Theory)
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