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Explaining Focal Points: Cognitive Hierarchy Theory versus Team Reasoning

Author

Listed:
  • Nicholas Bardsley

    (National Centre for Research Methods, University of Southampton)

  • Judith Mehta

    (School of Economics, University of East Anglia)

  • Chris Starmer

    (CeDEx, University of Nottingham)

  • Robert Sugden

    (School of Economics, University of East Anglia)

Abstract

This paper reports experimental tests of two alternative explanations of how players use focal points to select equilibria in one-shot coordination games. Cognitive hierarchy theory explains coordination as the result of common beliefs about players’ pre-reflective inclinations towards the relevant strategies; the theory of team reasoning explains it as the result of the players’ using a non-standard form of reasoning. We report two experiments. One finds strong support for team reasoning; the other supports cognitive hierarchy theory. In the light of additional questionnaire evidence, we conclude that players’ reasoning is sensitive to the decision context.

Suggested Citation

  • Nicholas Bardsley & Judith Mehta & Chris Starmer & Robert Sugden, 2008. "Explaining Focal Points: Cognitive Hierarchy Theory versus Team Reasoning," Discussion Papers 2008-17, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  • Handle: RePEc:not:notcdx:2008-17
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    File URL: https://www.nottingham.ac.uk/cedex/documents/papers/2008-17.pdf
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    References listed on IDEAS

    as
    1. Bacharach, Michael, 1999. "Interactive team reasoning: A contribution to the theory of co-operation," Research in Economics, Elsevier, vol. 53(2), pages 117-147, June.
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    3. Stahl Dale O. & Wilson Paul W., 1995. "On Players' Models of Other Players: Theory and Experimental Evidence," Games and Economic Behavior, Elsevier, vol. 10(1), pages 218-254, July.
    4. Bacharach, Michael & Stahl, Dale O., 2000. "Variable-Frame Level-n Theory," Games and Economic Behavior, Elsevier, vol. 32(2), pages 220-246, August.
    5. Bacharach, Michael & Bernasconi, Michele, 1997. "The Variable Frame Theory of Focal Points: An Experimental Study," Games and Economic Behavior, Elsevier, vol. 19(1), pages 1-45, April.
    6. Sugden, Robert, 1995. "A Theory of Focal Points," Economic Journal, Royal Economic Society, vol. 105(430), pages 533-550, May.
    7. Binmore, Ken & Samuelson, Larry, 2006. "The evolution of focal points," Games and Economic Behavior, Elsevier, vol. 55(1), pages 21-42, April.
    8. Cubitt, Robin P. & Sugden, Robert, 2003. "Common Knowledge, Salience And Convention: A Reconstruction Of David Lewis' Game Theory," Economics and Philosophy, Cambridge University Press, vol. 19(02), pages 175-210, October.
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    12. Maarten Janssen, 2001. "Rationalizing Focal Points," Theory and Decision, Springer, vol. 50(2), pages 119-148, March.
    13. Mehta, Judith & Starmer, Chris & Sugden, Robert, 1994. "The Nature of Salience: An Experimental Investigation of Pure Coordination Games," American Economic Review, American Economic Association, vol. 84(3), pages 658-673, June.
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    More about this item

    Keywords

    salience; focal point; cognitive hierarchy; team reasoning;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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