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Level-k reasoning in a generalized beauty contest

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  • Shapiro, Dmitry
  • Shi, Xianwen
  • Zillante, Artie

Abstract

We study how the predictive power of level-k models changes as we perturb the classical beauty contest setting along two dimensions: the strength of the coordination motive and the information symmetry. We use a variation of the Morris and Shin (2002) model as the unified framework for our study, and find that the predictive power of level-k models varies considerably along these two dimensions. Level-k models are successful in predicting subject behavior in settings with symmetric information and a strong coordination motive. Their predictive power weakens significantly when either private information is introduced or the importance of the coordination motive is decreased.

Suggested Citation

  • Shapiro, Dmitry & Shi, Xianwen & Zillante, Artie, 2014. "Level-k reasoning in a generalized beauty contest," Games and Economic Behavior, Elsevier, vol. 86(C), pages 308-329.
  • Handle: RePEc:eee:gamebe:v:86:y:2014:i:c:p:308-329
    DOI: 10.1016/j.geb.2014.04.002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kneeland, Terri, 2016. "Coordination under limited depth of reasoning," Games and Economic Behavior, Elsevier, vol. 96(C), pages 49-64.
    2. repec:eee:matsoc:v:90:y:2017:i:c:p:191-207 is not listed on IDEAS
    3. repec:wsi:igtrxx:v:19:y:2017:i:04:n:s0219198917500219 is not listed on IDEAS
    4. Anna Bassi & Kenneth C. Williams, 2014. "Examining Monotonicity and Saliency Using Level- k Reasoning in a Voting Game," Games, MDPI, Open Access Journal, vol. 5(1), pages 1-27, February.
    5. Breitmoser, Yves, 2015. "Knowing me, imagining you: Projection and overbidding in auctions," MPRA Paper 62052, University Library of Munich, Germany.
    6. Kene Boun My & Camille Cornand & Rodolphe Dos Santos Ferreira, 2017. "Speculation rather than enterprise? Keynes’ beauty contest revisited in theory and experiment," Working Papers of BETA 2017-13, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    7. Camille Cornand & Frank Heinemann, 2018. "Experiments on macroeconomics: methods and applications," Post-Print halshs-01902045, HAL.
    8. repec:eee:gamebe:v:113:y:2019:i:c:p:423-447 is not listed on IDEAS
    9. Penczynski, Stefan P., 2016. "Strategic thinking: The influence of the game," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 72-84.
    10. Nagel, Rosemarie & Bühren, Christoph & Frank, Björn, 2017. "Inspired and inspiring: Hervé Moulin and the discovery of the beauty contest game," Mathematical Social Sciences, Elsevier, vol. 90(C), pages 191-207.
    11. Breitmoser, Yves, 2017. "Knowing Me, Imagining You:," Rationality and Competition Discussion Paper Series 36, CRC TRR 190 Rationality and Competition.
    12. Carlos Alós-Ferrer & Johannes Buckenmaier, 2018. "Cognitive sophistication and deliberation times," ECON - Working Papers 292, Department of Economics - University of Zurich, revised Apr 2019.
    13. Steven J. Bosworth, 2017. "The importance of higher-order beliefs to successful coordination," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 237-258, March.

    More about this item

    Keywords

    Level-k models; Beauty contests; Coordination games;

    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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