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Experimental Evidence on Iterated Reasoning in Games

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  • Sascha Grehl
  • Andreas Tutić

Abstract

We present experimental evidence on two forms of iterated reasoning in games, i.e. backward induction and interactive knowledge. Besides reliable estimates of the cognitive skills of the subjects, our design allows us to disentangle two possible explanations for the observed limits in performed iterated reasoning: Restrictions in subjects’ cognitive abilities and their beliefs concerning the rationality of co-players. In comparison to previous literature, our estimates regarding subjects’ skills in iterated reasoning are quite pessimistic. Also, we find that beliefs concerning the rationality of co-players are completely irrelevant in explaining the observed limited amount of iterated reasoning in the dirty faces game. In addition, it is demonstrated that skills in backward induction are a solid predictor for skills in iterated knowledge, which points to some generalized ability of the subjects in iterated reasoning.

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  • Sascha Grehl & Andreas Tutić, 2015. "Experimental Evidence on Iterated Reasoning in Games," PLOS ONE, Public Library of Science, vol. 10(8), pages 1-19, August.
    • Handle: RePEc:plo:pone00:0136524
    DOI: 10.1371/journal.pone.0136524
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    References listed on IDEAS

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    Cited by:

    1. 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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