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Strategic sophistication of individuals and teams. Experimental evidence

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  • Sutter, Matthias
  • Czermak, Simon
  • Feri, Francesco

Abstract

Many important decisions require strategic sophistication. We examine experimentally whether teams act more strategically than individuals. We let individuals and teams make choices in simple games, and also elicit first- and second-order beliefs. We find that teams play the Nash equilibrium strategy significantly more often, and their choices are more often a best response to stated first order beliefs. Distributional preferences make equilibrium play less likely. Using a mixture model, the estimated probability to play strategically is 62% for teams, but only 40% for individuals. A model of noisy introspection reveals that teams differ from individuals in higher order beliefs.

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  • Sutter, Matthias & Czermak, Simon & Feri, Francesco, 2013. "Strategic sophistication of individuals and teams. Experimental evidence," European Economic Review, Elsevier, vol. 64(C), pages 395-410.
    • Handle: RePEc:eee:eecrev:v:64:y:2013:i:c:p:395-410
    DOI: 10.1016/j.euroecorev.2013.06.003
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    6. Vincent Mak & Darryl A. Seale & Amnon Rapoport & Eyran J. Gisches, 2019. "Voting Rules in Sequential Search by Committees: Theory and Experiments," Management Science, INFORMS, vol. 65(9), pages 4349-4364, September.
    7. Lahav, Yaron, 2015. "Eliciting beliefs in beauty contest experiments," Economics Letters, Elsevier, vol. 137(C), pages 45-49.
    8. Brosig-Koch, Jeannette & Heinrich, Timo & Helbach, Christoph, 2014. "Does truth win when teams reason strategically?," Economics Letters, Elsevier, vol. 123(1), pages 86-89.
    9. Cox, Caleb A. & Stoddard, Brock, 2018. "Strategic thinking in public goods games with teams," Journal of Public Economics, Elsevier, vol. 161(C), pages 31-43.
    10. Bauer, Dominik & Wolff, Irenaeus, 2019. "Biases in Beliefs," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203601, Verein für Socialpolitik / German Economic Association.
    11. Caserta, Maurizio & Distefano, Rosaria & Ferrante, Livio & Reito, Francesco, 2023. "The Good of Rules: A pilot study on prosocial behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    12. Yoshitaka Okano, 2017. "Team vs. Individual, Hypothesis Testing vs. Model Selection, and the Minimax Model," Working Papers SDES-2017-18, Kochi University of Technology, School of Economics and Management, revised Oct 2017.
    13. Czermak, Simon & Feri, Francesco & Glätzle-Rützler, Daniela & Sutter, Matthias, 2016. "How strategic are children and adolescents? Experimental evidence from normal-form games," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 265-285.
    14. Francesco Feri & Paolo Pin, 2020. "Externalities Aggregation In Network Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1635-1658, November.
    15. Sutter, Matthias & Zoller, Claudia & Glätzle-Rützler, Daniela, 2019. "Economic behavior of children and adolescents – A first survey of experimental economics results," European Economic Review, Elsevier, vol. 111(C), pages 98-121.
    16. Dominik Bauer & Irenaeus Wolff, 2018. "Biases in Beliefs: Experimental Evidence," TWI Research Paper Series 109, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    17. Despoina Alempaki & Andrew M. Colman & Felix Kölle & Graham Loomes & Briony D. Pulford, 2022. "Investigating the failure to best respond in experimental games," Experimental Economics, Springer;Economic Science Association, vol. 25(2), pages 656-679, April.
    18. Ayala Arad & Kevin P. Grubiak & Stefan P. Penczynski, 2024. "Does communicating within a team influence individuals’ reasoning and decisions?," Experimental Economics, Springer;Economic Science Association, vol. 27(1), pages 109-129, March.
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    20. Murad, Zahra, 2016. "Does group discussion lead to better informed and more strategic market entry decisions?," Economics Letters, Elsevier, vol. 144(C), pages 25-28.

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    More about this item

    Keywords

    Strategic sophistication; Experiment; Team decision making; Individual decision making; Noisy introspection;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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