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Strategic reasoning in p-beauty contests

  • Breitmoser, Yves

This paper analyzes strategic choice in p-beauty contests. First, I show that it is not generally a best reply to guess the expected target value, even in games with n>2 players, and that iterated best response strictly applied does not induce a choice sequence approximating pk⋅0.5. Second, I argue that the beliefs and actions of players typically considered to be level 2–4 are intuitively captured also by high-level concepts such as quantal response equilibrium and noisy introspection. Third, I analyze this hypothesis econometrically. The results concur. In six different data sets, the choices are described more adequately as mixtures of quantal response equilibrium and noisy introspection than as level-k mixtures.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 75 (2012)
Issue (Month): 2 ()
Pages: 555-569

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Handle: RePEc:eee:gamebe:v:75:y:2012:i:2:p:555-569
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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