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Playing the wrong game: An experimental analysis of relational complexity and strategic misrepresentation

  • Giovanna Devetag

    ()

  • Massimo Warglien

    ()

It has been suggested that players often produce simplified and/or misspecified mental representations of interactive decision problems (Kreps, 1990). We submit that the relational structure of players’ preferences in a game induces cognitive complexity, and may be an important driver of such simplifications. We provide a formal classification of order structures in two-person normal form games based on the two properties of monotonicity and projectivity, and present experiments in which subjects must first construct a representation of games of different relational complexity, and subsequently play the games according to their own representation. Experimental results support the hypothesis that relational complexity matters. More complex games are harder to represent, and this difficulty is correlated with measures of short term memory capacity. Furthermore, most erroneous representations are less complex than the correct ones. In addition, subjects who misrepresent the games behave consistently with such representations according to simple but rational decision criteria. This suggests that in many strategic settings individuals may act optimally on the ground of simplified and mistaken premises.

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Paper provided by Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia in its series CEEL Working Papers with number 0504.

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Date of creation: 2005
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Handle: RePEc:trn:utwpce:0504
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  2. A. Rubinstein, 1999. "Economics and Language," Princeton Economic Theory Papers 00s6, Economics Department, Princeton University.
  3. Miguel Costa-Gomes & Vincent P. Crawford & Bruno Broseta, . "Cognition and Behavior in Normal-Form Games:An Experimental Study," Discussion Papers 00/45, Department of Economics, University of York.
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  10. Colin Camerer & Teck-Hua Ho & Juin Kuan Chong, 2003. "A cognitive hierarchy theory of one-shot games: Some preliminary results," Levine's Bibliography 506439000000000495, UCLA Department of Economics.
  11. Nagel, Rosemarie, 1993. "Experimental Results on Interactive Competitive Guessing," Discussion Paper Serie B 236, University of Bonn, Germany.
  12. Knez, Marc & Camerer, Colin, 2000. "Increasing Cooperation in Prisoner's Dilemmas by Establishing a Precedent of Efficiency in Coordination Games," Organizational Behavior and Human Decision Processes, Elsevier, vol. 82(2), pages 194-216, July.
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