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Self-selection with non-equilibrium beliefs: Predicting behavior in a tournament experiment

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  • Brünner, Tobias

Abstract

In this study we use level-k thinking and a recently proposed model of non-equilibrium beliefs in dynamic games (PBNLK) to predict behavior in a tournament with self-selection. We find that the combination of level-k and PBNLK predicts both the population of types in the tournament, as well as the mean and variance of efforts better than Nash equilibrium, a static level-k model and other models of non-equilibrium beliefs. Our results show that non-equilibrium beliefs are an important determinant for the decision to compete in a tournament and the performance in that tournament. Moreover, a useful model of non-equilibrium beliefs should allow players to update their beliefs during the course of the competition.

Suggested Citation

  • Brünner, Tobias, 2020. "Self-selection with non-equilibrium beliefs: Predicting behavior in a tournament experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 389-396.
    • Handle: RePEc:eee:jeborg:v:169:y:2020:i:c:p:389-396
    DOI: 10.1016/j.jebo.2019.11.028
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    2. Dan Levin & Luyao Zhang, 2022. "Bridging Level-K to Nash Equilibrium," Papers 2202.12292, arXiv.org, revised Feb 2022.

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    More about this item

    Keywords

    Level-k thinking; NLK; Bayesian updating; Tournament; Experiment; Competition;
    All these keywords.

    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
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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