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Robustness of Level-k Reasoning in Generalized Beauty Contest Games

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  • Dmitry Shapiro
  • Xianwen Shi
  • Artie Zillante

Abstract

We study how the predictive power of level-k models changes as we perturb the classical beauty contest setting along two dimensions: the strength of the coordination motive and the information symmetry. We use the Morris and Shin (2002) model as the unified framework for our study, and find that the predictive power of level-k models varies considerably along these two dimensions. Level-k models are successful in predicting subject behavior in settings with symmetric information and a strong coordination motive. When we introduce private information or weaken the strength of the coordination motive, the predictive power of level-k models decreases significantly.

Suggested Citation

  • Dmitry Shapiro & Xianwen Shi & Artie Zillante, 2009. "Robustness of Level-k Reasoning in Generalized Beauty Contest Games," Working Papers tecipa-380, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-380
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    Cited by:

    1. Romain Baeriswyl & Camille Cornand, 2014. "Reducing Overreaction To Central Banks' Disclosures: Theory And Experiment," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 1087-1126, August.
    2. Camille Cornand & Frank Heinemann, 2014. "Measuring agents’ reaction to private and public information in games with strategic complementarities," Experimental Economics, Springer;Economic Science Association, vol. 17(1), pages 61-77, March.
    3. Georganas, Sotiris & Healy, Paul J. & Weber, Roberto A., 2015. "On the persistence of strategic sophistication," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 369-400.
    4. Emna Trabelsi & Walid Hichri, 2013. "Central bank Transparency and Information Dissemination : An experimental Approach," Working Papers 1336, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    5. Johannes Leder & Leonhard Schilbach & Andreas Mojzisch, 2016. "Strategic Decision-Making and Social Skills: Integrating Behavioral Economics and Social Cognition Research," IJFS, MDPI, vol. 4(4), pages 1-14, November.

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    More about this item

    Keywords

    level-k models; beauty contest; coordination;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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