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Reasoning about others' reasoning

Author

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  • Alaoui, Larbi
  • Janezic, Katharina A.
  • Penta, Antonio

Abstract

Recent experiments suggest that level-k behavior is often driven by subjects' beliefs, rather than their binding cognitive bounds. But the extent to which this is true in general is not completely understood, mainly because disentangling ‘cognitive’ and ‘behavioral’ levels is challenging experimentally and theoretically. In this paper we provide a simple experimental design strategy (the ‘tutorial method’) to disentangle the two concepts purely based on subjects' choices. We also provide a ‘replacement method’ to assess whether the increased sophistication observed when stakes are higher is due to an increase in subjects' own understanding or to their beliefs over others' increased incentives to reason.

Suggested Citation

  • Alaoui, Larbi & Janezic, Katharina A. & Penta, Antonio, 2020. "Reasoning about others' reasoning," Journal of Economic Theory, Elsevier, vol. 189(C).
  • Handle: RePEc:eee:jetheo:v:189:y:2020:i:c:s0022053120300855
    DOI: 10.1016/j.jet.2020.105091
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    References listed on IDEAS

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    Cited by:

    1. Trabelsi, Emna & Hichri, Walid, 2021. "Central Bank Transparency with (semi-)public Information: Laboratory Experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    2. Tilman Börgers & Jiangtao Li, 2019. "Strategically Simple Mechanisms," Econometrica, Econometric Society, vol. 87(6), pages 2003-2035, November.
    3. Rampal, Jeevant, 2022. "Limited Foresight Equilibrium," Games and Economic Behavior, Elsevier, vol. 132(C), pages 166-188.
    4. Crawford, Vincent P., 2021. "Efficient mechanisms for level-k bilateral trading," Games and Economic Behavior, Elsevier, vol. 127(C), pages 80-101.
    5. Zafer Akin, 2023. "Asymmetric guessing games," Theory and Decision, Springer, vol. 94(4), pages 637-676, May.
    6. Burkhard C. Schipper & Hang Zhou, 2022. "Level-k Thinking in the Extensive Form," Working Papers 352, University of California, Davis, Department of Economics.
    7. Konstantinos Ioannidis, 2022. "Habitual Communication," Tinbergen Institute Discussion Papers 22-016/I, Tinbergen Institute.
    8. King King Li & Kang Rong, 2023. "A Two-Step Guessing Game," Post-Print hal-04376266, HAL.
    9. Kets, Willemien & Kager, Wouter & Sandroni, Alvaro, 2022. "The value of a coordination game," Journal of Economic Theory, Elsevier, vol. 201(C).
    10. Ye Jin, 2021. "Does level-k behavior imply level-k thinking?," Experimental Economics, Springer;Economic Science Association, vol. 24(1), pages 330-353, March.
    11. Ennio Bilancini & Leonardo Boncinelli & Luigi Luini, 2017. "Does Focality Depend on the Mode of Cognition? Experimental Evidence on Pure Coordination Games," Department of Economics University of Siena 771, Department of Economics, University of Siena.
    12. Wei James Chen & Meng-Jhang Fong & Po-Hsuan Lin, 2023. "Measuring Higher-Order Rationality with Belief Control," Papers 2309.07427, arXiv.org.

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    More about this item

    Keywords

    Cognitive bound; Depth of reasoning; Higher-order beliefs; Level-k reasoning; Replacement method; Tutorial method;
    All these keywords.

    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
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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