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

  • Virtudes Alba-Fernández
  • Pablo Brañas-Garza
  • Francisca Jiménez-Jiménez
  • Javier Rodero-Cosano

    ()

The aim of this investigation is to show how the use of classroom experiments may be a good pedagogical tool to teach the Nash equilibrium (NE) concept. For our purposes, the basic game is a repeated version of the Beauty Contest Game (BCG), a simple guessing game in which repetition lets students react to other players’ choices and converge iteratively to the equilibrium solution. We perform this experiment with undergraduate students with no previous training in game theory. After four rounds, we observe a clear decreasing tendency in the average submitted number in all groups. Thus, our findings prove that by playing a repeated BCG, students quickly learn how to reach the NE solution.

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Paper provided by Institute for Social Syudies of Andalusia - Higher Council for Scientific Research in its series IESA Working Papers Series with number 0413.

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Length: 40 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:esa:iesawp:0413
Contact details of provider: Web page: http://www.d-andalucia.csic.es/iesa.htm

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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 NMI Sunder, 2002. "Stock Market as a 'Beauty Contest': Investor Beliefs and Price Bubbles sans Dividend Anchors," Yale School of Management Working Papers ysm271, 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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