Belief and Higher-Order Belief in the Centipede Games: An Experimental Investigation

Yun Wang

No 2018-11-03, Working Papers from Wang Yanan Institute for Studies in Economics (WISE), Xiamen University

Abstract: This paper experimentally explores epistemic conditions behind the subgame perfect equilibrium (SPNE) of centipede games. We propose a novel design of laboratory experiment to elicit subjects’ beliefs regarding their opponents’ strategies and 1st-order beliefs. The measured beliefs, together with the choice data, help us to estimate each subject’s level of rationality, belief of rationality, and 2nd-order belief of rationality. We consider two experimental treatments: the classic centipede game in which an efficient non-equilibrium outcome exists, and its constant-sum variation. Data shows that, in the classic centipede treatment, fewer subjects behave rationally; meanwhile, subjects are less likely to believe in their opponents’ rationality and belief of rationality. Furthermore, in the constant-sum centipede treatment, there is a non-trivial portion of subjects who behave rationally, believe in others’ rationality, and hold 2nd-order belief of rationality. Our results indicate that the efficiency property of the classic centipede game may lead to subjects’ non-equilibrium behavior by diffusing their beliefs and higher-order beliefs.

Keywords: Centipede Game; Rationality; Belief of Rationality; Higher Order Belief; Experimental Economics; Laboratory Experiments (search for similar items in EconPapers)
JEL-codes: C72 C91 C92 D83 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2016-02-03, Revised 2016-02-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://econpub.xmu.edu.cn/research/repec/upload/201811031831571617.pdf (application/pdf)

Related works:
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:wyi:wpaper:002388

Access Statistics for this paper

More papers in Working Papers from Wang Yanan Institute for Studies in Economics (WISE), Xiamen University
Bibliographic data for series maintained by WISE Technical Team ().