Altruism and Ambiguity in the Centipede game

Elmshauser Béla

No 93p8s_v1, SocArXiv from Center for Open Science

Abstract: Beyond the fact that players do not take at the first node, the experimental literature on the centipede game has highlighted a number of puzzles that neither the standard rational approach or existing behavioural theories can perfectly explain. In this paper, I propose a model of heterogeneous levels of altruism and ambiguity to shed light on these puzzles and explain the experimental data. This model yields a unique equilibrium in which players use pure strategies. Furthermore, a uniform distribution of altruism and ambiguity fits better the centipede game behaviours than the two-player type model of McKelvey and Palfrey (1992) and the agent quantal response equilibrium. To best fit the data, around 90% of the players should be modelled as ambiguity-averse and only 10% as altruistic.

Date: 2022-10-08
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:93p8s_v1

DOI: 10.31219/osf.io/93p8s_v1

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