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How cognitive skills affect strategic behavior: Cognitive ability, fluid intelligence and judgment

Author

Listed:
  • Gill, David
  • Knepper, Zachary
  • Prowse, Victoria
  • Zhou, Junya

Abstract

We explore the influence of cognitive ability and judgment on strategic behavior in the beauty contest game (where the Nash equilibrium action is zero). Using the level-k model of bounded rationality, cognitive ability and judgment both predict higher level strategic thinking. However, individuals with better judgment choose zero less frequently, and we uncover a novel dynamic mechanism that sheds light on this pattern. Taken together, our results indicate that fluid (i.e., analytical) intelligence is a primary driver of strategic level-k thinking, while facets of judgment that are distinct from fluid intelligence drive the lower inclination of high judgment individuals to choose zero.

Suggested Citation

  • Gill, David & Knepper, Zachary & Prowse, Victoria & Zhou, Junya, 2025. "How cognitive skills affect strategic behavior: Cognitive ability, fluid intelligence and judgment," Games and Economic Behavior, Elsevier, vol. 149(C), pages 82-95.
    • Handle: RePEc:eee:gamebe:v:149:y:2025:i:c:p:82-95
    DOI: 10.1016/j.geb.2024.09.007
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    More about this item

    Keywords

    Cognitive ability; Judgment; Fluid intelligence; Matrix reasoning; Beauty contest; Strategic sophistication; Level-k; Experiment; Game theory;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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