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Bounded Rationality and Strategic Uncertainty in a Simple Dominance Solvable Game

Author Info

Listed author(s):
  • 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.

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File URL: http://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
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Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 13-14.

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Length: 19 pages
Date of creation: 2013
Handle: RePEc:uwa:wpaper:13-14
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Web page: http://www.business.uwa.edu.au/school/disciplines/economics

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