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Depth of Reasoning and Information Revelation: An Experiment on the Distribution of k-Levels

Volker Benndorf (), Dorothea Kübler () and Hans-Theo Normann ()
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Volker Benndorf: Goethe-Universität Frankfurt, 60323 Frankfurt, Germany
Hans-Theo Normann: Duesseldorf Institute for Competition Economics (DICE), 40225 Düsseldorf, Germany

International Game Theory Review (IGTR), 2017, vol. 19, issue 04, 1-18

Abstract: The level-k model is a workhorse in behavioral game theory. For comparisons across experiments and predictions in future studies, it is crucial to assess the empirical distribution of k-levels. We present a revelation game suitable for this purpose. In a labor market context, workers can choose to reveal their productivity at a cost, and players’ strategies reveal their level of reasoning in terms of a k-level. We find that the most frequently observed reasoning levels are k = 2 and k = 3. In our game roughly 30% of the players are k ≤ 1 and 25% are k ≥ 4. We compare our results to other experiments that identify level-k distribution, foremost to the money request (or 11–20) game. Despite various differences to the 11–20 game, our revelation game suggests a very similar distribution of level-k types.

Keywords: Level-k reasoning; distribution of k-levels; unraveling; labor market; experiment (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1142/S0219198917500219

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