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How Cognitive Skills Affect Strategic Behavior: Cognitive Ability, Fluid Intelligence and Judgment

Author

Listed:
  • Gill, David

    (Department of Economics, Purdue University)

  • Knepper, Zachary

    (Department of Economics, Purdue University)

  • Prowse, Victoria

    (Department of Economics, Purdue University)

  • Zhou, Junya

    (Department of Economics, Purdue University)

Abstract

We explore the influence of cognitive ability and judgment on strategic behavior in the beauty contest game. Using the level-k model of bounded rationality, cognitive ability and judgment both predict higher level strategic thinking. However, individuals with better judgment choose the Nash equilibrium action less frequently, and we uncover a novel dynamic mechanism that sheds light on this pattern. Taken together, our results indicate that fluid (i.e., analytical) intelligence is a primary driver of strategic level-k thinking, while facets of judgment that are distinct from fluid intelligence drive the lower inclination of high judgment individuals to choose the equilibrium action.

Suggested Citation

  • Gill, David & Knepper, Zachary & Prowse, Victoria & Zhou, Junya, 2023. "How Cognitive Skills Affect Strategic Behavior: Cognitive Ability, Fluid Intelligence and Judgment," CAGE Online Working Paper Series 690, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:690
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/wp690.2023.pdf
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    References listed on IDEAS

    as
    1. C. Mónica Capra, 2019. "Understanding decision processes in guessing games: a protocol analysis approach," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 5(1), pages 123-135, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    cognitive ability; judgment; fluid intelligence; matrix reasoning; beauty contest; strategic sophistication; level-k; experiment; game theory JEL Classification: C92; C72; D91;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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