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Inclusive Cognitive Hierarchy in Collective Decisions

Author

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  • Yukio Koriyama

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique)

  • Ali Ihsan Ozkes

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We study the implications of structural models of non-equilibrium thinking, in which players best respond while holding heterogeneous beliefs on the cognitive levels of others. We introduce an inclusive cognitive hierarchy model, in which players are capable of projecting the self to others in regard to their cognitive level. The model is tested in a laboratory experiment of collective decision-making, which supports inclusiveness. Our theoretical results show that inclusiveness is a key factor for asymptotic properties of deviations from equilibrium behavior. Asymptotic behavior can be categorized into three distinct types: naïve, Savage rational with inconsistent beliefs, and sophisticated.

Suggested Citation

  • Yukio Koriyama & Ali Ihsan Ozkes, 2018. "Inclusive Cognitive Hierarchy in Collective Decisions," Working Papers halshs-01822543, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01822543
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01822543
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    Cited by:

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    2. Dan Levin & Luyao Zhang, 2022. "Bridging Level-K to Nash Equilibrium," Papers 2202.12292, arXiv.org, revised Feb 2022.
    3. Feng, Jun & Qin, Xiangdong & Wang, Xiaoyuan, 2021. "A Bayesian cognitive hierarchy model with fixed reasoning levels," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 704-723.
    4. Benjamin Patrick Evans & Mikhail Prokopenko, 2021. "Bounded rationality for relaxing best response and mutual consistency: The Quantal Hierarchy model of decision-making," Papers 2106.15844, arXiv.org, revised Mar 2023.

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    More about this item

    Keywords

    collective decision-making; bounded rationality; cognitive hierarchy; information aggregation;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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