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Heterogeneity in Guessing Games: An Experiment

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  • Liu, Tianwei

Abstract

In interactions under strategic complementarity, naive players have a disproportionally large effect on the aggregate outcome, resulting in a nonlinear relationship between the proportion of sophisticated and naive players and the aggregate outcome. This paper studies this relationship in a beauty contest game by informing some players the game theoretic solution and systematically varying the proportion of informed players. The results show that the conditions predicted by strategic complementarity stand empirical test.

Suggested Citation

  • Liu, Tianwei, 2016. "Heterogeneity in Guessing Games: An Experiment," MPRA Paper 75001, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:75001
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    File URL: https://mpra.ub.uni-muenchen.de/76072/8/MPRA_paper_76072.pdf
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    References listed on IDEAS

    as
    1. Antoni Bosch-Domènech & José G. Montalvo & Rosemarie Nagel & Albert Satorra, 2002. "One, Two, (Three), Infinity, ...: Newspaper and Lab Beauty-Contest Experiments," American Economic Review, American Economic Association, vol. 92(5), pages 1687-1701, December.
    2. Sutan, Angela & Willinger, Marc, 2009. "Guessing with negative feedback: An experiment," Journal of Economic Dynamics and Control, Elsevier, vol. 33(5), pages 1123-1133, May.
    3. Miguel A. Costa-Gomes & Georg Weizsäcker, 2008. "Stated Beliefs and Play in Normal-Form Games," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 729-762.
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    6. Ignacio Palacios-Huerta & Oscar Volij, 2009. "Field Centipedes," American Economic Review, American Economic Association, vol. 99(4), pages 1619-1635, September.
    7. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-1326, December.
    8. Ho, Teck-Hua & Camerer, Colin & Weigelt, Keith, 1998. "Iterated Dominance and Iterated Best Response in Experimental "p-Beauty Contests."," American Economic Review, American Economic Association, vol. 88(4), pages 947-969, September.
    9. Hanaki, Nobuyuki & Koriyama, Yukio & Sutan, Angela & Willinger, Marc, 2019. "The strategic environment effect in beauty contest games," Games and Economic Behavior, Elsevier, vol. 113(C), pages 587-610.
    10. Robert Slonim, 2005. "Competing Against Experienced and Inexperienced Players," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 55-75, April.
    11. Agranov, Marina & Potamites, Elizabeth & Schotter, Andrew & Tergiman, Chloe, 2012. "Beliefs and endogenous cognitive levels: An experimental study," Games and Economic Behavior, Elsevier, vol. 75(2), pages 449-463.
    12. Haltiwanger, John & Waldman, Michael, 1985. "Rational Expectations and the Limits of Rationality: An Analysis of Heterogeneity," American Economic Review, American Economic Association, vol. 75(3), pages 326-340, June.
    13. Michael Haigh & John List, 2005. "A simple test of expected utility theory using professional traders," Artefactual Field Experiments 00093, The Field Experiments Website.
    14. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    15. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    16. repec:mpr:mprres:7497 is not listed on IDEAS
    17. Grosskopf, Brit & Nagel, Rosemarie, 2008. "The two-person beauty contest," Games and Economic Behavior, Elsevier, vol. 62(1), pages 93-99, January.
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    Cited by:

    1. Zafer Akin, 2023. "Asymmetric guessing games," Theory and Decision, Springer, vol. 94(4), pages 637-676, May.

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    More about this item

    Keywords

    Beauty contest; Strategic complementarity; Beliefs; Bounded rationality;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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