GAME THEORY FOR PLAYING GAMES: SOPHISTICATION IN A NEGATIVE-EXTERNALITY EXPERIMENT

John Michael Spraggon () and Robert J. Oxoby ()

Economic Inquiry, 2009, vol. 47, issue 3, pages 467-481

Abstract: "We explore the extent to which the lack of Nash payoff maximization in experimental games is attributable to the "sophistication" of participants (i.e., their understanding of strategic decision making and profit-maximizing decisions). To this end, we compare the behaviors of sophisticated participants (i.e., those who have been exposed to the concepts of game theory) against those of a more standard subject pool in a moral hazard environment. Results suggest that sophisticated subjects are significantly more likely to adopt strategies predicted by standard theory and arrive at a Nash equilibrium. "("JEL "C72, C91, C92, D63, D64) Copyright (c) 2008 Western Economic Association International.

Date: 2009

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