Abstract

‘‘Human experience, which is constantly contradicting theory, is the great test of truth.’’ �Dr. Johnson, quoted in James Boswell, The Life of Samuel Johnson L.L.D. This paper reports experiments designed to study strategic sophistication, the extent to which behavior in games reflects attempts to predict others ’ decisions, taking their incentives into account. We study subjects ’ initial responses to normal-form games with various patterns of iterated dominance and unique pure-strategy equilibria without dominance, using a computer interface that allowed them to search for hidden payoff information, while recording their searches. Monitoring subjects ’ information searches along with their decisions allows us to better understand how their decisions are determined, and subjects ’ deviations from the search patterns suggested by equilibrium analysis help to predict their deviations from equilibrium decisions.

Citations