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Beliefs and endogenous cognitive levels: An experimental study

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  • Agranov, Marina
  • Potamites, Elizabeth
  • Schotter, Andrew
  • Tergiman, Chloe

Abstract

In this paper we use a laboratory setting to manipulate our subjectsʼ beliefs about the cognitive levels of the players they are playing against. We show that in the context of the 2/3 guessing game, individual choices crucially depend on their beliefs about the level of others. Hence, a subjectʼs true cognitive level may be different than the one he exhibits in a game with the difference being attributed to his expectations about the sophistication of the players he is playing against.

Suggested Citation

  • Agranov, Marina & Potamites, Elizabeth & Schotter, Andrew & Tergiman, Chloe, 2012. "Beliefs and endogenous cognitive levels: An experimental study," Games and Economic Behavior, Elsevier, vol. 75(2), pages 449-463.
  • Handle: RePEc:eee:gamebe:v:75:y:2012:i:2:p:449-463
    DOI: 10.1016/j.geb.2012.02.002
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    Cited by:

    1. Hyndman, Kyle & Terracol, Antoine & Vaksmann, Jonathan, 2013. "Beliefs and (In)Stability in Normal-Form Games," MPRA Paper 47221, University Library of Munich, Germany.
    2. James Tremewan & Chloé Le Coq & Alexander D. Wagner, 2013. "Social Centipedes: the Impact of Group Identity on Preferences and Reasoning," Vienna Economics Papers 1305, University of Vienna, Department of Economics.
    3. Bayer, R.-C. & Renou, Ludovic, 2016. "Logical abilities and behavior in strategic-form games," Journal of Economic Psychology, Elsevier, vol. 56(C), pages 39-59.
    4. Külpmann, Philipp & Khantadze, Davit, 2016. "Identifying the reasons for coordination failure in a laboratory experiment," Center for Mathematical Economics Working Papers 567, Center for Mathematical Economics, Bielefeld University.
    5. Le Coq, Chloé & Tremewan, James & Wagner, Alexander K., 2015. "On the effects of group identity in strategic environments," European Economic Review, Elsevier, vol. 76(C), pages 239-252.
    6. repec:wsi:igtrxx:v:19:y:2017:i:04:n:s0219198917500219 is not listed on IDEAS
    7. repec:eee:gamebe:v:106:y:2017:i:c:p:188-208 is not listed on IDEAS
    8. Lee, Byung Soo & Stewart, Colin, 2016. "Identification of payoffs in repeated games," Games and Economic Behavior, Elsevier, vol. 99(C), pages 82-88.
    9. Liu, Tianwei, 2016. "Heterogeneity in Guessing Games: An Experiment," MPRA Paper 75001, University Library of Munich, Germany.
    10. Allred, Sarah & Duffy, Sean & Smith, John, 2016. "Cognitive load and strategic sophistication," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 162-178.
    11. Maria Cubel & Santiago Sanchez-Pages, 2016. "Gender differences and stereotypes in strategic thinking," UB Economics Working Papers 2016/338, Universitat de Barcelona, Facultat d'Economia i Empresa, UB Economics.
    12. Philippe Gillen & Alexander Rasch & Achim Wambach & Peter Werner, 2016. "Bid pooling in reverse multi-unit Dutch auctions: an experimental investigation," Theory and Decision, Springer, vol. 81(4), pages 511-534, November.
    13. Mikhail Drugov & Roberto Hernán-González & Praveen Kujal & Marta Troya Martinez, 2013. "Cheap Talk with Two Audiences: An Experiment," Working Papers 13-32, Chapman University, Economic Science Institute.
    14. Shu-Heng Chen & Ye-Rong Du & Lee-Xieng Yang, 2014. "Cognitive capacity and cognitive hierarchy: a study based on beauty contest experiments," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 9(1), pages 69-105, April.
    15. Penczynski, Stefan P., 2016. "Strategic thinking: The influence of the game," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 72-84.
    16. Syngjoo Choi, 2012. "A cognitive hierarchy model of learning in networks," Review of Economic Design, Springer;Society for Economic Design, vol. 16(2), pages 215-250, September.
    17. Leder, Johannes & Häusser, Jan Alexander & Mojzisch, Andreas, 2015. "Exploring the underpinnings of impaired strategic decision-making under stress," Journal of Economic Psychology, Elsevier, vol. 49(C), pages 133-140.
    18. Dietmar Fehr & Steffen Huck, 2016. "Who knows it is a game? On strategic awareness and cognitive ability," Experimental Economics, Springer;Economic Science Association, vol. 19(4), pages 713-726, December.
    19. Eugenio Proto & Aldo Rustichini & Andis Sofianos, 2016. "Intelligence, Personality and Gains from Cooperation in Repeated Interactions," CESifo Working Paper Series 6121, CESifo Group Munich.
    20. Bayer, Ralph C. & Renou, Ludovic, 2016. "Logical omniscience at the laboratory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 64(C), pages 41-49.
    21. Fehr, Dietmar & Huck, Steffen, 2013. "Who knows It is a game? On rule understanding, strategic awareness and cognitive ability," Discussion Papers, Research Unit: Economics of Change SP II 2013-306, Social Science Research Center Berlin (WZB).
    22. María Cubel & Santiago Sanchez-Pages, 2014. "Gender differences and stereotypes in the beauty contest," Working Papers 2014/13, Institut d'Economia de Barcelona (IEB).

    More about this item

    Keywords

    Guessing game; Beliefs; Level-k theory;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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