The strategic environment effect in beauty contest games

Nobuyuki Hanaki, Angela Sutan and Marc Willinger

Working Papers from HAL

Abstract: Recent experimental studies have shown that observed outcomes deviate significantly more from the Nash equilibrium when actions are strategic complements than when they are strategic substitutes. This " strategic environment effect " offers promising insights into the aggregate consequences of interactions among heterogeneous boundedly rational agents, but its macroeconomic implications have been questioned because the underlying experiments involve a small number of agents. We studied beauty contest games with a unique interior Nash equilibrium to determine the critical group size for triggering the strategic environment effect. We show theoretically that the effect operates for interactions among three or more agents. Our experimental results partially support this theory, showing a statistically significant strategic environment effect for groups of five or more agents. Our findings establish that experiments involving a small number of interacting agents can provide major insights into macro phenomena and bolster previous work done on such issues as price dynamics.

Keywords: beauty contest games; iterative reasoning; strategic substitutability; strategic complementarity (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-exp and nep-gth
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01294915v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://shs.hal.science/halshs-01294915v1/document (application/pdf)

Related works:
Journal Article: The strategic environment effect in beauty contest games (2019)
Working Paper: The strategic environment effect in beauty contest games (2019)
Working Paper: The strategic environment effect in beauty contest games (2018)
Working Paper: The strategic environment effect in beauty contest games (2018)
Working Paper: The Strategic Environment Effect in Beauty Contest Games (2016)
Working Paper: The strategic environment effect in beauty contest games (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-01294915

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().