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Vertigo: Comparing Structural Models of Imperfect Behavior in Experimental Games

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  • El-Gamal, Mahmoud A.
  • Palfrey, Thomas R.

Abstract

We introduce the game of Vertigo to study learning in experimental games with one-sided incomplete information. Our models allow players to make errors when choosing their actions. We compare six models where the players are modeled as sophisticated (taking errors in action into account when constructing strategies) or unsophisticated on one dimension, and employ Bayes' rule, a faster updating rule, or no updating at all on the second. Using a fully Bayesian structural econometric approach, we find that unsophisticated models perform better than sophisticated models, and models with no (or slower) updating perform better than models with faster updating. Journal of Economic Literature Classification Numbers: 026, 211, 215.
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Suggested Citation

  • El-Gamal, Mahmoud A. & Palfrey, Thomas R., 1992. "Vertigo: Comparing Structural Models of Imperfect Behavior in Experimental Games," Working Papers 800, California Institute of Technology, Division of the Humanities and Social Sciences.
    • Handle: RePEc:clt:sswopa:800
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    2. Daniel Houser & Michael Keane & Kevin McCabe, 2004. "Behavior in a Dynamic Decision Problem: An Analysis of Experimental Evidence Using a Bayesian Type Classification Algorithm," Econometrica, Econometric Society, vol. 72(3), pages 781-822, May.
    3. Franz Rothlauf & Daniel Schunk & Jella Pfeiffer, 2005. "Classification of Human Decision Behavior: Finding Modular Decision Rules with Genetic Algorithms," MEA discussion paper series 05079, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    4. Holt, Debra J., 1999. "An Empirical Model of Strategic Choice with an Application to Coordination Games," Games and Economic Behavior, Elsevier, vol. 27(1), pages 86-105, April.

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