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Identifying Level-k Reasoning in Repeated Games: Strategies, Beliefs, and Cognitive Ability

Author

Listed:
  • Gill, David

    (Purdue University)

  • Rosokha, Yaroslav

    (Purdue University)

Abstract

In this paper, we identify level-k reasoning in repeated games that operates at the level of a supergame strategy. First, we develop a model of level-k reasoning that incorporates choices over strategies as well as beliefs about the strategies chosen by others. Then, jointly using elicited strategies and beliefs about strategies from the indefinitely repeated Prisoner's Dilemma, and applying a new notion of balance-optimal error tolerance, we classify a substantial fraction of subjects as level-1 or level-2. Moreover, we show that when level-k reasoning operates at the level of a repeated-game strategy, cognitive ability and experience predict higher level reasoning.

Suggested Citation

  • Gill, David & Rosokha, Yaroslav, 2026. "Identifying Level-k Reasoning in Repeated Games: Strategies, Beliefs, and Cognitive Ability," IZA Discussion Papers 18832, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18832
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    References listed on IDEAS

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    1. Kyle Hyndman & Erkut Özbay & Andrew Schotter & Wolf Ehrblatt, 2012. "Belief formation: an experiment with outside observers," Experimental Economics, Springer;Economic Science Association, vol. 15(1), pages 176-203, March.
    2. Agranov, Marina & Potamites, Elizabeth & Schotter, Andrew & Tergiman, Chloe, 2012. "Beliefs and endogenous cognitive levels: An experimental study," Games and Economic Behavior, Elsevier, vol. 75(2), pages 449-463.
    3. repec:mpr:mprres:7497 is not listed on IDEAS
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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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