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Strategic complexity and the value of thinking

Author

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  • Gill, David

    (Purdue University)

  • Prowse, Victoria

    (Purdue University)

Abstract

Response times are a simple low-cost indicator of the process of reasoning in strategic games. In this paper, we leverage the dynamic nature of response-time data from repeated strategic interactions to measure the strategic complexity of a situation by how long people think on average whenthey face that situation (where we categorize situations according to the characteristics of play in the previous round). We find that strategic complexity varies significantly across situations, and we find considerable heterogeneity in how responsive subjects’ thinking times are to complexity. We also study how variation in response times at the individual level across rounds affects strategic behavior and success. We find that ‘overthinking’ is detrimental to performance: when a subject thinks for longer than she would normally do in a particular situation, she wins less frequently and earns less. The behavioral mechanism that drives the reduction in performance is a tendency to move away from Nash equilibrium behavior. Overthinking is detrimental even though subjects who think for longer on average tend to be more successful. Finally, cognitive ability and personality have no effect on average response times.

Suggested Citation

  • Gill, David & Prowse, Victoria, 2019. "Strategic complexity and the value of thinking," CAGE Online Working Paper Series 431, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:431
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/431-2019_gill.pdf
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    Cited by:

    1. Larbi Alaoui & Katharina A. Janezic & Antonio Penta, 2017. "Reasoning about Others’ Reasoning," Working Papers 1003, Barcelona Graduate School of Economics.
    2. Carlos Alós-Ferrer & Johannes Buckenmaier, 2018. "Cognitive sophistication and deliberation times," ECON - Working Papers 292, Department of Economics - University of Zurich, revised Apr 2019.

    More about this item

    Keywords

    Response time; decision time; thinking time; strategic complexity; game theory; strategic games; repeated games; beauty contest; cognitive ability; personality. JEL Classification: C72; C91.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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