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Do people minimize regret in strategic situations? A level-k comparison

Bernardo García-Pola

Games and Economic Behavior, 2020, vol. 124, issue C, 82-104

Abstract: Regret minimization and level-k reasoning have been proposed as alternative models for rationalizing non-equilibrium behavior in games. We provide a theoretical and experimental analysis of the relationship between these two models, a relationship that has been neglected by economists. Both theories predict the same behavior in a surprisingly large number of experimentally tested games. We identify conditions under which this happens and use them to design a series of games to separate minimax regret from level-1. The experimental test of these games and data from Costa-Gomes and Crawford (2006) reveal that no one systematically minimizes regret, casting doubt on minimax regret as a relevant explanation for behavior in strategic situations.

Keywords: Regret minimization; Level-k model; Experiments; Initial responses; Mixture-of-types models (search for similar items in EconPapers)
JEL-codes: C72 C92 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.geb.2020.07.013

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Handle: RePEc:eee:gamebe:v:124:y:2020:i:c:p:82-104