IDEAS home Printed from https://ideas.repec.org/p/uwa/wpaper/13-14.html
   My bibliography  Save this paper

Bounded Rationality and Strategic Uncertainty in a Simple Dominance Solvable Game

Author

Listed:
  • Nobuyuki Hanaki

    (Aix-Marseille University)

  • Nicolas Jacquemet

    (University of Lorraine and Paris School of Economics)

  • Stéphane Luchini

    (Aix-Marseille University)

  • Adam Zylbersztejn

    (University of Lorraine and Paris School of Economics)

Abstract

How much of the failures to achieve Pareto efficient outcome observed in a simple 2 2 dominance solvable game can be attributed to strategic uncertainty and how much is actually due to individual bounded rationality? We address this question by conducting a set of experiments involving two main treatments: one in which two human subjects interact, and another in which one human subject interacts with a computer program whose behavior is known. By making the behavior of the computer opponent perfectly predictable, the latter treatment eliminates strategic uncertainty. Our results suggest that observed coordination failures can be attributed equally to individual bounded rationality and strategic uncertainty.

Suggested Citation

  • Nobuyuki Hanaki & Nicolas Jacquemet & Stéphane Luchini & Adam Zylbersztejn, 2013. "Bounded Rationality and Strategic Uncertainty in a Simple Dominance Solvable Game," Economics Discussion / Working Papers 13-14, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:13-14
    as

    Download full text from publisher

    File URL: https://www.business.uwa.edu.au/__data/assets/pdf_file/0007/2275765/13-14-BOUNDED-RATIONALITY-AND-STRATEGIC-UNCERTAINTY-IN-A-SIMPLE-DOMINANCE-SOLVABLE-GAME.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Timothy N. Cason & Daniel Friedman, 1997. "Price Formation in Single Call Markets," Econometrica, Econometric Society, vol. 65(2), pages 311-346, March.
    2. Jacquemet Nicolas & Zylbersztejn Adam, 2013. "Learning, Words and Actions: Experimental Evidence on Coordination-Improving Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 1-33, July.
    3. Nicolas Jacquemet & Adam Zylbersztejn, 2014. "What drives failure to maximize payoffs in the lab? A test of the inequality aversion hypothesis," Review of Economic Design, Springer;Society for Economic Design, vol. 18(4), pages 243-264, December.
    4. Matthew Embrey & Guillaume R. Fréchette & Steven F. Lehrer, 2015. "Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioural Types," Review of Economic Studies, Oxford University Press, vol. 82(2), pages 608-631.
    5. Costa-Gomes, Miguel A. & Crawford, Vincent P., 2004. "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study," University of California at San Diego, Economics Working Paper Series qt449812fx, Department of Economics, UC San Diego.
    6. Eizo Akiyama & Nobuyuki Hanaki & Ryuchiro Ishikawa, 2012. "Effect of uncertainty about others’ rationality in experimental asset markets," AMSE Working Papers 1234, Aix-Marseille School of Economics, France.
    7. Nicolas Jacquemet & Alexander James & Stéphane Luchini & Jason F. Shogren, 2017. "Referenda Under Oath," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 479-504, July.
    8. Rosenthal, Robert W., 1981. "Games of perfect information, predatory pricing and the chain-store paradox," Journal of Economic Theory, Elsevier, vol. 25(1), pages 92-100, August.
    9. Beard, T Randolph & Beil, Richard O, Jr & Mataga, Yoshiharu, 2001. "Reliant Behavior in the United States and Japan," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 270-279, April.
    10. Ernst Fehr & Jean-Robert Tyran, 2001. "Does Money Illusion Matter?," American Economic Review, American Economic Association, vol. 91(5), pages 1239-1262, December.
    11. T. Randolph Beard & Richard O. Beil, 1994. "Do People Rely on the Self-Interested Maximization of Others? An Experimental Test," Management Science, INFORMS, vol. 40(2), pages 252-262, February.
    12. Asen Ivanov & Dan Levin & Muriel Niederle, 2010. "Can Relaxation of Beliefs Rationalize the Winner's Curse?: An Experimental Study," Econometrica, Econometric Society, vol. 78(4), pages 1435-1452, July.
    13. Vincent P. Crawford & Miguel A. Costa-Gomes, 2006. "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 96(5), pages 1737-1768, December.
    14. Abadie A., 2002. "Bootstrap Tests for Distributional Treatment Effects in Instrumental Variable Models," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 284-292, March.
    15. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-1326, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwa:wpaper:13-14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sam Tang). General contact details of provider: http://edirc.repec.org/data/deuwaau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.