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The 11-20 Money Request Game: A Level-k Reasoning Study

  • Ayala Arad
  • Ariel Rubinstein

We study experimentally a new two-player game: each player requests an amount between 11 and 20 shekels. He receives the requested amount and if he requests exactly one shekel less than the other player, he receives an additional 20 shekels. Level-k reasoning is appealing due to the natural starting point (requesting 20) and the straightforward best-response operation. Nevertheless, almost all subjects exhibit at most three levels of reasoning. Two variants of the game demonstrate that the depth of reasoning is not increased by enhancing the attractiveness of the level-0 strategy or by reducing the cost of undercutting the other player.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3561
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File URL: http://www.aeaweb.org/aer/data/dec2012/20101560_data.zip
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 7 (December)
Pages: 3561-73

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:7:p:3561-73
Note: DOI: 10.1257/aer.102.7.3561
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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. Costa-Gomes, Miguel A. & Crawford, Vincent P., 2004. "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study," University of California at San Diego, Economics Working Paper Series qt449812fx, Department of Economics, UC San Diego.
  3. Rosenthal, Robert W., 1981. "Games of perfect information, predatory pricing and the chain-store paradox," Journal of Economic Theory, Elsevier, vol. 25(1), pages 92-100, August.
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