Hot versus cold behavior in centipede games

Bernardo García-Pola (), Nagore Iriberri and Jaromír Kovářík ()
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Bernardo García-Pola: UNSW Business School
Jaromír Kovářík: University of the Basque Country UPV-EHU

Journal of the Economic Science Association, 2020, vol. 6, issue 2, No 8, 226-238

Abstract: Abstract There is a long-standing unresolved debate in game theory and experimental economics regarding the behavioral equivalence of the direct-response method (hot play) and the strategy method (cold play). Using a unified experimental framework, we compare behavior elicited via both methods in four different Centipede Games that differ in their incentives to take or pass, in the evolution of those incentives over decision nodes, and in the asymmetry of the incentives across the two player roles. Out of the four Centipede Games, we find that both methods yield statistically different behavior in two of them, while in the remaining two we cannot reject the same behavior across the hot and cold methods. Whenever the behavior diverges, hot play consistently makes individuals stop earlier. These findings should shift the question from whether both methods are generically behaviorally equivalent to under which conditions they are (not) and why.

Keywords: Centipede games; Direct method; Strategy method; Experiments (search for similar items in EconPapers)
JEL-codes: C72 C91 D91 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s40881-020-00096-z

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