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The Impact of Naïve Advice and Observational Learning in Beauty-contest Games

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  • Martin G. Kocher

    (Universiteit van Amsterdam)

  • Matthias Sutter

    (University of Innsbruck)

  • Florian Wakolbinger

    (University of Innsbruck)

Abstract

We study the impact of advice or observation on the depth of reasoning in an experimental beauty-contest game. Both sources of information trigger faster convergence to the equilibrium. Yet, we find that subjects who receive naïve advice outperform uninformed subjects permanently, whereas subjects who observe others’ past behavior before making their decision do only have a temporary advantage over uninformed subjects. We show in a simulation that the latter result is due to subjects failing to make the most out of observing others.

Suggested Citation

  • Martin G. Kocher & Matthias Sutter & Florian Wakolbinger, 2007. "The Impact of Naïve Advice and Observational Learning in Beauty-contest Games," Tinbergen Institute Discussion Papers 07-015/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20070015
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    References listed on IDEAS

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    Cited by:

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    2. Timothy N. Cason & Anya Samek, 2015. "Learning through passive participation in asset market bubbles," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 1(2), pages 170-181, December.

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    More about this item

    Keywords

    social learning; advice; observational learning; beauty-contest game;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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