Rational reasoning or adaptive behavior? Evidence from two-person beauty contest games

Brit Grosskopf and Rosemarie Nagel

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Many experiments have shown that human subjects do not necessarily behave in line with game theoretic assumptions and solution concepts. The reasons for this non-conformity are multiple. In this paper we study the argument whether a deviation from game theory is because subjects are rational, but doubt that others are rational as well, compared to the argument that subjects, in general, are boundedly rational themselves. To distinguish these two hypotheses, we study behavior in repeated 2-person and many-person Beauty- Contest-Games which are strategically different from one another. We analyze four different treatments and observe that convergence toward equilibrium is driven by learning through the information about the other player’s choice and adaptation rather than self-initiated rational reasoning.

Keywords: Beauty contest; Guessing game; Bounded rationality; Weak dominance; Learning (search for similar items in EconPapers)
JEL-codes: C7 C9 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-gth and nep-upt
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1068

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