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A cognitive hierarchy model of learning in networks

  • Syngjoo Choi

    ()

This paper proposes a method for estimating a hierarchical model of bounded rationality in games of learning in networks. A cognitive hierarchy comprises a set of cognitive types whose behavior ranges from random to substantively rational. Specifically, each cognitive type in the model corresponds to the number of periods in which economic agents process new information. Using experimental data, we estimate type distributions in a variety of task environments and show how estimated distributions depend on the structural properties of the environments. The estimation results identify significant levels of behavioral heterogeneity in the experimental data and overall confirm comparative static conjectures on type distributions across task environments. Surprisingly, the model replicates the aggregate patterns of the behavior in the data quite well. Finally, we found that the dominant type in the data is closely related to Bayes-rational behavior. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s10058-012-0126-6
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Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 16 (2012)
Issue (Month): 2 (September)
Pages: 215-250

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Handle: RePEc:spr:reecde:v:16:y:2012:i:2:p:215-250
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  1. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521530927, 1.
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  8. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521824019, 1.
  9. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
  10. Kübler, Dorothea & Weizsäcker, Georg, 2000. "Limited depth of reasoning and failure of cascade formation in the laboratory," SFB 373 Discussion Papers 2001,3, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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  12. Stahl Dale O. & Wilson Paul W., 1995. "On Players' Models of Other Players: Theory and Experimental Evidence," Games and Economic Behavior, Elsevier, vol. 10(1), pages 218-254, July.
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