Playing the wrong game: An experimental analysis of relational complexity and strategic misrepresentation

Giovanna Devetag and Massimo Warglien ()

No 504, CEEL Working Papers from Computable and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia

Abstract: It has been suggested that players often produce simplified and/or misspecified mental representations of interactive decision problems (Kreps, 1990). We submit that the relational structure of players’ preferences in a game induces cognitive complexity, and may be an important driver of such simplifications. We provide a formal classification of order structures in two-person normal form games based on the two properties of monotonicity and projectivity, and present experiments in which subjects must first construct a representation of games of different relational complexity, and subsequently play the games according to their own representation. Experimental results support the hypothesis that relational complexity matters. More complex games are harder to represent, and this difficulty is correlated with measures of short term memory capacity. Furthermore, most erroneous representations are less complex than the correct ones. In addition, subjects who misrepresent the games behave consistently with such representations according to simple but rational decision criteria. This suggests that in many strategic settings individuals may act optimally on the ground of simplified and mistaken premises.

Keywords: pure motive; mixed motive; preferences; bi-orders; language; cognition; projectivity; monotonicity; short term memory; experiments (search for similar items in EconPapers)
JEL-codes: C70 C72 C91 D01 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp and nep-gth
Date: Written
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Journal Article: Playing the wrong game: An experimental analysis of relational complexity and strategic misrepresentation (2008)
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