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Finite mixture analysis of beauty-contest data using generalised beta distributions

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Abstract

This paper introduces a mixture model based on the beta distribution, without preestablished means and variances, to analyze a large set of Beauty-Contest data obtained from diverse groups of experiments (Bosch-Domenech et al. 2002). This model gives a better t of the experimental data, and more precision to the hypothesis that a large proportion of individuals follow a common pattern of reasoning, described as iterated best reply (degenerate), than mixture models based on the normal distribution. The analysis shows that the means of the distributions across the groups of experiments are pretty stable, while the proportions of choices at di erent levels of reasoning vary across groups.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 737.

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Date of creation: Jan 2004
Date of revision: May 2010
Handle: RePEc:upf:upfgen:737

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Keywords: Beauty-Contest experiments; decision theory; reasoning hierarchy; finite mixture distribution; beta distribution; EM algorithm.;

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  1. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
  2. John List & David Reiley, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  3. Stahl, Dale O., 1998. "Is step-j thinking an arbitrary modelling restriction or a fact of human nature?," Journal of Economic Behavior & Organization, Elsevier, vol. 37(1), pages 33-51, September.
  4. Antoni Bosch-Dom?nech & Jose Garcia-Montalvo & Rosemarie Nagel & Albert Satorra, 2002. "One, two, (three), infinity: Newspaper and lab beauty-contest experiments," Artefactual Field Experiments 00011, The Field Experiments Website.
  5. Andersen, Steffen & Harrison, Glenn W. & Hole, Arne Risa & Rutström, Elisabet E., 2009. "Non-Linear Mixed Logit and the Characterization of Individual Heterogeneity," Working Papers 06-2009, Copenhagen Business School, Department of Economics.
  6. Arcidiacono, Peter & Jones, John B., 2000. "Finite Mixture Distribution, Sequential Likelihood, and the EM Algorithm," Working Papers 00-16, Duke University, Department of Economics.
  7. McDonald, James B. & Xu, Yexiao J., 1995. "A generalization of the beta distribution with applications," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 133-152.
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Cited by:
  1. Wengström, Erik, 2007. "Setting the Anchor: Price Competition, Level-n Theory and Communication," Working Papers 2007:6, Lund University, Department of Economics.

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