Identifying Level-k Reasoning in Repeated Games: Strategies, Beliefs, and Cognitive Ability

David Gill () and Yaroslav Rosokha ()
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David Gill: Purdue University
Yaroslav Rosokha: Purdue University

No 18832, IZA Discussion Papers from IZA Network @ LISER

Abstract: In this paper, we identify level-k reasoning in repeated games that operates at the level of a supergame strategy. First, we develop a model of level-k reasoning that incorporates choices over strategies as well as beliefs about the strategies chosen by others. Then, jointly using elicited strategies and beliefs about strategies from the indefinitely repeated Prisoner's Dilemma, and applying a new notion of balance-optimal error tolerance, we classify a substantial fraction of subjects as level-1 or level-2. Moreover, we show that when level-k reasoning operates at the level of a repeated-game strategy, cognitive ability and experience predict higher level reasoning.

Keywords: level-k; repeated game; Prisoner's Dilemma; strategy; beliefs; cognitive ability; experience; elicitation; bounded rationality; experiment; game theory (search for similar items in EconPapers)
JEL-codes: C73 D83 D91 (search for similar items in EconPapers)
Date: 2026-07
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