Billiards and Brains: Cognitive Ability and Behavior in a p-Beauty Contest
Terence C. Burnham,
David Cesarini (),
Björn Wallace (),
Magnus Johannesson () and
Paul Lichtenstein ()
Additional contact information Björn Wallace: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Paul Lichtenstein: Department of Medical Epidemiology and Biostatistics, Karolinska Institutet, Postal: Karolinska Institutet, Box 281, SE-171 77 Stockholm, Sweden
"Beauty contests" are well-studied, dominance-solvable games that generate two interesting results. First, most behavior does not conform to the unique Nash equilibrium. Second, there is considerable unexplained heterogeneity in behavior. In this work, we evaluate the relationship between beauty contest behavior and cognitive ability. We find that subjects with high cognitive ability exhibit behavior that is closer to the Nash equlibrium. We examine this finding through the prism of economic and biological theory.
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