On Cognitive Ability and Learning in a Beauty Contest

Oliver Schnusenberg and Andres Gallo

Journal for Economic Educators, 2011, vol. 11, issue 2, 13-24

Abstract: We reinvestigate a version of the beauty contest originally developed by Keynes (1936) with a focus on cognitive reflection. Using a sample of 166 undergraduate students at a regional university in Florida, we confirm previous research by Burnham et al. (2009) that cognitive reflection, as measured by Frederick's (2005) cognitive reflection test, matters in the first round of the game; players with a higher CRT score pick significantly lower numbers, and their responses cluster more. Unlike previous research, however, we find that cognitive ability is important only when faced with a new situation. In subsequent rounds of the game, cognitive ability is subordinate to a learning effect and players' responses and the variability of responses are not significantly related to CRT scores. This finding is important in financial markets, since it implies that anticipating the decisions and actions of other players is a function of experience, not necessarily cognitive ability.

Keywords: beauty contest; cognitive reflection test; cognitive ability; CRT (search for similar items in EconPapers)
JEL-codes: A22 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:mts:jrnlee:v:11:y:2011:i:2:p:13-24

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