An Experiment on a Multi-Period Beauty Contest Game

Nobuyuki Hanaki and Yuta Takahashi

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: We present and conduct a novel experiment on a multi-period beauty contest game. Leveraging the new multi-period feature, we propose a new methodology to test the forward-lookingness of expectations and explore how expectations are formed in our dynamic environment. By studying how expectations are revised over time, we provide new evidence for forward-looking expectation formation. Moreover, we uncover a new effect of strategic environment: only when the game exhibits strategic complementarity do participants use extrapolation and expect increasingly higher prices in the future. This finding implies that the mode of expectation formation is endogenous to the economic environment of the participants.

Date: 2023-09, Revised 2024-12
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1213rr

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