IDEAS home Printed from https://ideas.repec.org/p/qed/wpaper/1033.html
   My bibliography  Save this paper

Rationalizing Irrational Beliefs

Author

Listed:
  • Geoffrey Dunbar

    (Simon Fraser University)

  • Juan Tu

    (Queen's University)

  • Xiaoting Wang

    (Brock University)

  • Ruqu Wang

Abstract

In this paper, we re-examine various previous experimental studies of theCentipede Game in the literature. These experiments found that players rarely follow the subgame-perfect equilibrium strategies of the game, and various modifications to the game were proposed to explain the outcomes of the experiments. We here offer yetanother modification. Players have a choice of whether or not to believe that their opponents use subgame-perfect equilibrium strategies. We define a `behavioral equilibrium' forthis game. This equilibrium concept can reproduce the outcomes of those experiments.

Suggested Citation

  • Geoffrey Dunbar & Juan Tu & Xiaoting Wang & Ruqu Wang, 2006. "Rationalizing Irrational Beliefs," Working Paper 1033, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1033
    as

    Download full text from publisher

    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1033.pdf
    File Function: First version 2006
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. McKelvey, Richard D & Palfrey, Thomas R, 1992. "An Experimental Study of the Centipede Game," Econometrica, Econometric Society, vol. 60(4), pages 803-836, July.
    2. Jacob K. Goeree & Charles A. Holt, 2001. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," American Economic Review, American Economic Association, vol. 91(5), pages 1402-1422, December.
    3. Basu, Kaushik, 1988. "Strategic irrationality in extensive games," Mathematical Social Sciences, Elsevier, vol. 15(3), pages 247-260, June.
    4. Zauner, Klaus G., 1999. "A Payoff Uncertainty Explanation of Results in Experimental Centipede Games," Games and Economic Behavior, Elsevier, vol. 26(1), pages 157-185, January.
    5. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 9-41, June.
    6. Rosenthal, Robert W., 1981. "Games of perfect information, predatory pricing and the chain-store paradox," Journal of Economic Theory, Elsevier, vol. 25(1), pages 92-100, August.
    7. Tirole, Jean, 2002. "Rational irrationality: Some economics of self-management," European Economic Review, Elsevier, vol. 46(4-5), pages 633-655, May.
    8. Caplan, Bryan, 2001. "Rational Irrationality and the Microfoundations of Political Failure," Public Choice, Springer, vol. 107(3-4), pages 311-331, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. García-Pola, Bernardo & Iriberri, Nagore & Kovářík, Jaromír, 2020. "Non-equilibrium play in centipede games," Games and Economic Behavior, Elsevier, vol. 120(C), pages 391-433.
    2. Paolo Crosetto & Marco Mantovani, 2018. "Representation effects in the centipede game," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-13, October.
    3. Rapoport, Amnon & Stein, William E. & Parco, James E. & Nicholas, Thomas E., 2003. "Equilibrium play and adaptive learning in a three-person centipede game," Games and Economic Behavior, Elsevier, vol. 43(2), pages 239-265, May.
    4. Ignacio Palacios-Huerta & Oscar Volij, 2009. "Field Centipedes," American Economic Review, American Economic Association, vol. 99(4), pages 1619-1635, September.
    5. Camerer, Colin F. & Ho, Teck-Hua, 2015. "Behavioral Game Theory Experiments and Modeling," Handbook of Game Theory with Economic Applications,, Elsevier.
    6. 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.
    7. Philip A. Haile & Ali Hortaçsu & Grigory Kosenok, 2008. "On the Empirical Content of Quantal Response Equilibrium," American Economic Review, American Economic Association, vol. 98(1), pages 180-200, March.
    8. Jacob K. Goeree & Charles A. Holt, 2001. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," American Economic Review, American Economic Association, vol. 91(5), pages 1402-1422, December.
    9. Kirstein, Annette & Kirstein, Roland, 2004. "Less Rationality, More Efficiency: a Laboratory Experiment on "Lemon" Markets," CSLE Discussion Paper Series 2004-02, Saarland University, CSLE - Center for the Study of Law and Economics.
    10. Rogers, Brian W. & Palfrey, Thomas R. & Camerer, Colin F., 2009. "Heterogeneous quantal response equilibrium and cognitive hierarchies," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1440-1467, July.
    11. Spenkuch, Jörg, 2014. "Backward Induction in the Wild: Evidence from the U.S. Senate," MPRA Paper 58766, University Library of Munich, Germany.
    12. Steven D. Levitt & John A. List & Sally E. Sadoff, 2011. "Checkmate: Exploring Backward Induction among Chess Players," American Economic Review, American Economic Association, vol. 101(2), pages 975-990, April.
    13. Gary Bornstein & Tamar Kugler & Anthony Ziegelmeyer, 2002. "Individual and Group Decisions in the Centipede Game: Are Groups More “Rational” Players?," Discussion Paper Series dp298, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    14. Jacob Goeree & Charles Holt & Thomas Palfrey, 2005. "Regular Quantal Response Equilibrium," Experimental Economics, Springer;Economic Science Association, vol. 8(4), pages 347-367, December.
    15. Eva M. Krockow & Briony D. Pulford & Andrew M. Colman, 2015. "Competitive Centipede Games: Zero-End Payoffs and Payoff Inequality Deter Reciprocal Cooperation," Games, MDPI, vol. 6(3), pages 1-11, August.
    16. Kawagoe, Toshiji & Takizawa, Hirokazu, 2012. "Level-k analysis of experimental centipede games," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 548-566.
    17. Camerer, Colin F. & Ho, Teck-Hua & Chong, Juin-Kuan, 2002. "Sophisticated Experience-Weighted Attraction Learning and Strategic Teaching in Repeated Games," Journal of Economic Theory, Elsevier, vol. 104(1), pages 137-188, May.
    18. Dufwenberg, Martin & Van Essen, Matt, 2018. "King of the Hill: Giving backward induction its best shot," Games and Economic Behavior, Elsevier, vol. 112(C), pages 125-138.
    19. Jorn Rothe, 2000. "Uncertainty Aversion and Backward Induction," Econometric Society World Congress 2000 Contributed Papers 1610, Econometric Society.
    20. Rampal, Jeevant, 2022. "Limited Foresight Equilibrium," Games and Economic Behavior, Elsevier, vol. 132(C), pages 166-188.

    More about this item

    Keywords

    centipede games; game theory; experimental economics; behavioral economics;
    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:qed:wpaper:1033. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Babcock (email available below). General contact details of provider: https://edirc.repec.org/data/qedquca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.