Cognitive Ability, Character Skills, and Learning to Play Equilibrium: A Level-k Analysis

David Gill and Victoria Prowse

No 8236, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we investigate how cognitive ability and character skills influence behavior, success and the evolution of play towards Nash equilibrium in repeated strategic interactions. We study behavior in a p-beauty contest experiment and find striking differences according to cognitive ability: more cognitively able subjects choose numbers closer to equilibrium, converge more frequently to equilibrium play and earn more even as behavior approaches the equilibrium prediction. To understand better how subjects with different cognitive abilities learn differently, we estimate a structural model of learning based on level-k reasoning. We find a systematic positive relationship between cognitive ability and levels; furthermore, the average level of more cognitively able subjects responds positively to the cognitive ability of their opponents, while the average level of less cognitively able subjects does not respond. Finally, we compare the influence of cognitive ability to that of character skills, and find that both cognition and personality affect behavior and learning. More agreeable and emotionally stable subjects perform better and learn faster, although the effect of cognitive ability on behavior is stronger than that of character skills.

Keywords: cognitive ability; character skills; personality traits; level-k; bounded rationality; learning; convergence; non-equilibrium behavior; beauty contest; repeated games; structural modeling; theory of mind; intelligence; IQ; cognition; Raven test (search for similar items in EconPapers)
JEL-codes: C73 C92 D83 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2014-06
New Economics Papers: this item is included in nep-evo, nep-exp, nep-gth, nep-hpe and nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Published - published in: Journal of Political Economy, 2016, 124 (6), 1619-1676

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Related works:
Journal Article: Cognitive Ability, Character Skills, and Learning to Play Equilibrium: A Level-k Analysis (2016)
Working Paper: Cognitive ability, character skills, and learning to play equilibrium: A level-k analysis (2014)
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