EconPapers    
Economics at your fingertips  
 

The strategic environment effect in beauty contest games

Nobuyuki Hanaki, Yukio Koriyama (), Angela Sutan () and Marc Willinger ()
Additional contact information
Nobuyuki Hanaki: GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur
Angela Sutan: BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC)

CEE-M Working Papers from CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro

Abstract: Recent experimental studies have shown that observed outcomes deviate significantly morefrom the Nash equilibrium when actions are strategic complements than when they are strategic substitutes. This "strategic environment effect" offers promising insights into the aggregate consequences of interactions among heterogeneous boundedly rational agents, but its macroeconomic implications have been questioned because the underlying experiments involve a small number of agents. We studied beauty contest games with a unique interior Nash equilibrium to determine the critical group size for triggering the strategic environment effect, and we use both theory and experiments to shed light on its effectiveness. Based on cognitive hierarchy and level-K models, we show theoretically that the effect is operative for interactions among three or more agents. Our experimental results show a statistically significant strategic environment effect for groups of five or more agents, establishing its robustness against the increase in the population size. Our results bolster other experimental ndings on the strategic environment effects that are relevant for macroeconomic issues such as price fluctuations and nominal rigidity.

Keywords: strategic complementarity; strategic substitutability; beauty contest games; iterative reasoning (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-gth
Date: 2018-12-14
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01954922
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://hal.archives-ouvertes.fr/hal-01954922/document (application/pdf)

Related works:
Journal Article: The strategic environment effect in beauty contest games (2019) Downloads
Working Paper: The strategic environment effect in beauty contest games (2018) Downloads
Working Paper: The Strategic Environment Effect in Beauty Contest Games (2016) Downloads
Working Paper: The strategic environment effect in beauty contest games (2016) Downloads
Working Paper: The strategic environment effect in beauty contest games (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpceem:hal-01954922

Access Statistics for this paper

More papers in CEE-M Working Papers from CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro Contact information at EDIRC.
Bibliographic data for series maintained by Laurent Garnier ().

 
Page updated 2019-08-20
Handle: RePEc:hal:wpceem:hal-01954922