This paper studies the evolution of peoples' models of how other people think -- their theories of mind. First, this is formalized within the level-k model, which postulates a hierarchy of types, such that type k plays a k times iterated best response to the uniform distribution. It is found that, under plausible conditions, lower types co-exist with higher types. The results are extended to a model of learning, in which type k plays a k times iterated best response the average of past play. The results are also extended to the cognitive hierarchy model, and to the introduction of a type that plays a Nash equilibrium.
More papers in Working Paper Series in Economics and Finance from Stockholm School of Economics Address: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden Contact information at EDIRC. Series data maintained by Helena Lundin ().