Disequilibrium Behavior and Satisficing in the Centipede Game

Youngse Kim
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Youngse Kim: Yonsei University

Korean Economic Review, 1998, vol. 14, 245-260

Abstract: We reexamine subjects' behavior in the centipede game experiments studied by McKelvey and Palfrey (1992, Econometrica). We assume that players choose acts according to a modified version of case-based decision theory. The calibration results of this paper show that "satisficing" can explain the actual subjects' behavior surprisingly well. More precisely, it is shown that 86 to 92 percentage of the observed behavior is consistent with our model prediction. In our model, the initial aspiration level is not constrained, and the calibration results can be used to evaluate whether the inferred initial aspiration levels are consistent with the payoffs resulting from the subgame perfect equilibrium outcome.

Keywords: Subgame Perfect Equilibrium; Case-Based Decision; Satisficing; Minimal Inconsistency; Minimal Imperfection (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
Date: 1998
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