Game Theory for Playing Games: Sophistication in a Negative-Externality Experiment
John M. Spraggon
University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics
Robert J. Oxoby
University of Calgary - Economics; Institute for the Study of Labor (IZA)
Economic Inquiry, Vol. 47, Issue 3, pp. 467-481, July 2009
We explore the extent to which the lack of Nash payoff maximization in experimental games is attributable to the “sophistication” of participants (i.e., their understanding of strategic decision making and profit-maximizing decisions). To this end, we compare the behaviors of sophisticated participants (i.e., those who have been exposed to the concepts of game theory) against those of a more standard subject pool in a moral hazard environment. Results suggest that sophisticated subjects are significantly more likely to adopt strategies predicted by standard theory and arrive at a Nash equilibrium.
Number of Pages in PDF File: 15
JEL Classification: C72, C91, C92, D63, D64
Date posted: October 8, 2009
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