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Availability of Information and Representation Effects in the Centipede Game

Author

Listed:
  • Paolo Crosetto

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena)

  • Marco Mantovani

    (Université Libre de Bruxelles, and DEMM, Università degli studi di Milano, and CEREC, Facultés Universitaires Saint-Louis)

Abstract

The paper presents the results of a novel experiment testing the effects of environment complexity on strategic behavior, using a centipede game. Behavior in the centipede game has been explained either by appealing to failures of backward induction or by calling for preferences that induce equilibria consistent with observed behavior. By manipulating the way in which information is provided to subjects we show that reduced availability of information is sufficient to shift the distribution of take-nodes further from the equilibrium prediction. On the other hand, similar results are obtained in a treatment where reduced availability of information is combined with an attempt to elicit preferences for reciprocity, through the presentation of the centipede as a repeated trust game. Our results could be interpreted as cognitive limitations being more effective than preferences in determining (shifts in) behavior in our experimental centipede. Furthermore our results are at odds with the recent ones in Cox and James (2012), suggesting caution in generalizing their results. Reducing the availability of information may hamper backward induction or induce myopic behavior, depending on the strategic environment.

Suggested Citation

  • Paolo Crosetto & Marco Mantovani, 2012. "Availability of Information and Representation Effects in the Centipede Game," Jena Economics Research Papers 2012-051, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2012-051
    as

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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2012/wp_2012_051.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Marco Mantovani, 2015. "Limited backward induction: foresight and behavior in sequential games," Working Papers 289, University of Milano-Bicocca, Department of Economics, revised Jan 2015.

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    More about this item

    Keywords

    Centipede; Backward Induction; Representation effects;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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