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Guessing with negative feedback: An experiment

  • Sutan, Angela
  • Willinger, Marc

We investigate experimentally a new variant of the beauty contest game (BCG) in which players' actions are strategic substitutes (a negative feedback BCG). Our results show that chosen numbers are closer to the rational expectation equilibrium than in a strategic complements environment (a positive feedback BCG). We also find that the estimated average depth of reasoning from the cognitive hierarchy model does not differ between the two environments. We show that the difference may be attributed to the fact that additional information is more valuable when players' actions are strategic substitutes rather than strategic complements, in line with other recent experimental findings.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 5 (May)
Pages: 1123-1133

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:5:p:1123-1133
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Angela Sutan & Marc Willinger, 2006. "Raisonnement divinatoire à feedback négatif. Une investigation expérimentale," Revue économique, Presses de Sciences-Po, vol. 57(2), pages 281-295.
  2. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
  3. John Haltiwanger & Michael Waldman, 1983. "Rational Expectations and the Limits of Rationality: An Analysis of Heterogeneity," UCLA Economics Working Papers 303, UCLA Department of Economics.
  4. 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.
  5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  6. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2006. "Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model," American Economic Review, American Economic Association, vol. 96(4), pages 1043-1068, September.
  7. Jean-Robert Tyran & Ernst Fehr, 2002. "Limited Rationality and Strategic Interaction - The Impact of the Strategic Environment on Nominal Inertia," University of St. Gallen Department of Economics working paper series 2002 2002-25, Department of Economics, University of St. Gallen.
  8. Binmore, Ken, 1988. "Modeling Rational Players: Part II," Economics and Philosophy, Cambridge University Press, vol. 4(01), pages 9-55, April.
  9. Haltiwanger, John C & Waldman, Michael, 1989. "Limited Rationality and Strategic Complements: The Implications for Macroeconomics," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 463-83, August.
  10. Stahl, Dale O., 1996. "Boundedly Rational Rule Learning in a Guessing Game," Games and Economic Behavior, Elsevier, vol. 16(2), pages 303-330, October.
  11. Güth, Werner & Kocher, Martin G. & Sutter, Matthias, 2002. "Experimental 'beauty contests' with homogeneous and heterogeneous players and with interior and boundary equilibria," Munich Reprints in Economics 18165, University of Munich, Department of Economics.
  12. Guesnerie, R., 1989. "An Exploration of the Eductive Justifications of the Rational Expectations Hypotbesis," DELTA Working Papers 89-24, DELTA (Ecole normale supérieure).
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