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Rational reasoning or adaptive behavior? Evidence from two-person beauty contest games

Many experiments have shown that human subjects do not necessarily behave in line with game theoretic assumptions and solution concepts. The reasons for this non-conformity are multiple. In this paper we study the argument whether a deviation from game theory is because subjects are rational, but doubt that others are rational as well, compared to the argument that subjects, in general, are boundedly rational themselves. To distinguish these two hypotheses, we study behavior in repeated 2-person and many-person Beauty- Contest-Games which are strategically different from one another. We analyze four different treatments and observe that convergence toward equilibrium is driven by learning through the information about the other player’s choice and adaptation rather than self-initiated rational reasoning.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/1068.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1068.

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Date of creation: Jun 2007
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Handle: RePEc:upf:upfgen:1068
Contact details of provider: Web page: http://www.econ.upf.edu/

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