Rationalizing Irrational Beliefs

Geoffrey Dunbar, Juan Tu, Xiaoting Wang and Ruqu Wang ()
Additional contact information
Juan Tu: Queen's University
Xiaoting Wang: Brock University

No 1033, Working Paper from Economics Department, Queen's University

Abstract: In this paper, we re-examine various previous experimental studies of theCentipede Game in the literature. These experiments found that players rarely follow the subgame-perfect equilibrium strategies of the game, and various modifications to the game were proposed to explain the outcomes of the experiments. We here offer yetanother modification. Players have a choice of whether or not to believe that their opponents use subgame-perfect equilibrium strategies. We define a `behavioral equilibrium' forthis game. This equilibrium concept can reproduce the outcomes of those experiments.

Keywords: centipede games; game theory; experimental economics; behavioral economics (search for similar items in EconPapers)
JEL-codes: C72 C91 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2006-02
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1033

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