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

Martin Kocher, Matthias Sutter (matthias.sutter@coll.mpg.de) and Florian Wakolbinger

No 07-015/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

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.

Keywords: social learning; advice; observational learning; beauty-contest game (search for similar items in EconPapers)
JEL-codes: C70 C72 C91 (search for similar items in EconPapers)
Date: 2007-01-29
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Working Paper: The impact of naive advice and observational learning in beauty-contest games (2007) Downloads
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