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Belief and Higher-Order Belief in the Centipede Games: Theory and Experiment

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  • Yun Wang

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Abstract

This paper experimentally explores people's beliefs behind the failure of backward induction in the centipede games. I elicit players' beliefs about opponents' strategies and 1st-order beliefs. I find that subjects maximize their monetary payoffs according to their stated beliefs less frequently in the Baseline Centipede treatment where an efficient non-equilibrium outcome exists; they do so more frequently in the Constant Sum treatment where the efficiency property is removed. Moreover, subjects believe their opponents' maximizing behavior and expect their opponents to hold the same belief less frequently in the Baseline Centipede treatment and more frequently in the Constant Sum treatment.

Suggested Citation

  • Yun Wang, 2015. "Belief and Higher-Order Belief in the Centipede Games: Theory and Experiment," WISE Working Papers 2015-03-24, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  • Handle: RePEc:wyi:wpaper:002254
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    References listed on IDEAS

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    More about this item

    Keywords

    Centipede Game; Rationality; Belief and Higher Order Belief; Laboratory Experiments; Learning;

    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
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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