Abstract. Experimentalists frequently claim that human subjects in the laboratory violate game-theoretic predictions. It is here argued that this claim is usually premature. The paper elaborates on this theme by way of raising some conceptual and methodological issues in connection with the very definition of a game and of players ’ preferences, in particular with respect to potential context dependence, interpersonal preference dependence, backward induction and incomplete information.

Abstract not found

This paper reports an experiment that elicits subjects ’ initial responses to 16 dominance-solvable two-person guessing games. The structure is publicly announced except for varying payoff parameters, to which subjects are given free access. Varying the parameters allows very strong separation of the behavior implied by leading decision rules. Subjects ’ decisions and searches show that most subjects understood the games and sought to maximize payoffs, but many had simplified models of others ’ decisions that led to systematic deviations from equilibrium. The predictable component of their deviations is well explained by a structural nonequilibrium model of initial responses based on level-k thinking. (JEL C72, C92, D83)... professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth, and higher degrees.

comments from several referees and seminar participants at many universities including Harvard, Cornell, New

Most learning models assume players are adaptive (i.e., they respond only to their own previous experience and ignore others ’ payoff information) and behavior is not sensitive to the way in which players are matched. Empirical evidence suggests otherwise. In this paper, we extend our adaptive experience-weighted attraction (EWA) learning model to capture sophisticated learning and strategic teaching in repeated games. The generalized model assumes there is a mixture of adaptive learners and sophisticated players. An adaptive learner adjusts his behavior the EWA way. A sophisticated player rationally best-responds to her forecasts of all other behaviors. A sophisticated player can be either myopic or farsighted. A farsighted player develops multiple-period rather than single-period forecasts of others ’ behaviors and chooses to ‘‘teach’ ’ the other players by choosing a strategy scenario that gives her the highest discounted net present value. We estimate the model using data from p-beauty contests and repeated trust games with incomplete information. The generalized model is better than the adaptive EWA model in describing and predicting behavior. Including teaching also allows an empirical

Most learning models assume players are adaptive (i.e., they respond only to their own previous experience and ignore others ' payo ® information) and behavior is not sensitive to the way in which players are matched. Empirical evidence suggests otherwise. In this paper, we extend our adaptive experienceweighted attraction (EWA) learning model to capture sophisticated learning and strategic teaching in repeated games. The generalized model assumes there is a mixture of adaptive learners and sophisticated players. An adaptive learner adjusts his behavior the EWA way. A sophisticated player rationally best-responds to her forecasts of all other behaviors. A sophisticated player can be either myopic or farsighted. A farsighted player develops multiple-period rather than single-period forecasts of others ' behaviors and chooses to `teach ' the other players by choosing a strategy scenario that gives her the highest discounted net present value. We estimate the model using data from p-beauty contests and repeated trust games with incomplete information. The generalized model is better than the

It is standard in multiagent settings to assume that agents will adopt Nash equilibrium strategies. However, studies in experimental economics demonstrate that Nash equilibrium is a poor description of human players ’ actual behaviour. In this study, we consider a wide range of widely-studied models from behavioural game theory. For what we believe is the first time, we evaluate each of these models in a meta-analysis, taking as our data set large-scale and publicly-available experimental data from the literature. We then propose a modified model that we believe is more suitable for practical prediction of human behaviour. ii Table of Contents Abstract................................... ii

“What we got here…is a failure to communicate.”

Abstract not found

We conduct laboratory experiments on sender-receiver games with an incentive for senders to exaggerate (such as security analysts painting a rosy picture about earnings prospects). Our results show that “overcommunication”—messages are more informative of the true state than they should be, in equilibrium—is consistent with a level-k model. Eyetracking shows that senders look much more on the payoff rows corresponding to the true state, and much less at receiver payoffs than at their own payoffs. Senders ’ pupils also dilate more when their deception is larger in magnitude. Together, these data are consistent with the hypothesis that figuring out how to deceive another player is cognitively difficult as assumed in the level-k model. A combination of sender messages and lookup patterns predicts the true state about twice as often as predicted by equilibrium. Using these measures would enable receiver subjects to hypothetically earn up to 16-21 percent more than they actually do.