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Teaching Nash Equilibrium and Strategy Dominance: A Classroom Experiment on the Beauty Contest

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Abstract

The aim of this investigation is to display how the use of classroom experiments may be a good pedagogical tool to teach the Nash equilibrium (NE) concept. The basic game for our purposes is a repeated version of the Beauty Contest Game (BCG), a simple guessing game whose repetition lets students react to other players’ choices and to converge iteratively to the equilibrium solution. We performed this experiment with undergraduate students without any previous knowledge about game theory. After four rounds, we observed in all groups a clear decreasing tendency in the average chosen number. So, our findings prove that, by playing a repeated BCG, students quickly learn how to reach the NE solution.

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  • Virtudes Alba Fernández & Pablo Brañas Garza & Francisca Jiménez Jiménez & Javier Rodero Cosano, 2003. "Teaching Nash Equilibrium and Strategy Dominance: A Classroom Experiment on the Beauty Contest," Economic Working Papers at Centro de Estudios Andaluces E2003/47, Centro de Estudios Andaluces.
  • Handle: RePEc:cea:doctra:e2003_47
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    1. Duffy, John & Nagel, Rosemarie, 1997. "On the Robustness of Behaviour in Experimental "Beauty Contest" Games," Economic Journal, Royal Economic Society, vol. 107(445), pages 1684-1700, November.
    2. Shinichi Hirota & Shyam Sunder, 2002. "Stock Market as a 'Beauty Contest': Investor Beliefs and Price Bubbles sans Dividend Anchors," Yale School of Management Working Papers ysm2, Yale School of Management.
    3. Brit Grosskopf & Rosemarie Nagel, 2007. "Rational reasoning or adaptive behavior? Evidence from two-person beauty contest games," Economics Working Papers 1068, Department of Economics and Business, Universitat Pompeu Fabra.
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    1. Virtudes Alba Fernández & Pablo Brañas-Garza & Francisca Jiménez Jiménez & Javier Rodero Cosano, 2004. "Communication, coordination and competition in the beauty contest game: Eleven classroom experiments," ThE Papers 04/-1, Department of Economic Theory and Economic History of the University of Granada..

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    Keywords

    Classroom Experiments; Beauty Contest Game; Teaching; Nash Equilibrium.;

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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