Strategic Sophistication of Individuals and Teams in Experimental Normal-Form Games
University of Innsbruck; University of Gothenburg - Department of Economics; Institute for the Study of Labor (IZA)
affiliation not provided to SSRN
University of London
IZA Discussion Paper No. 4732
We present an experiment on strategic thinking and behavior of individuals and teams in one-shot normal-form games. Besides making choices, decision makers have to state their first- and second-order beliefs. We find that teams play the Nash strategy significantly more often, and their choices are more often consistent by being a best reply to first order beliefs. We identify the complexity of a game and the payoffs in equilibrium as determining the likelihood of consistent behavior according to textbook rationality. Using a mixture model, the estimated probability to play strategically is 62% for teams, but only 40% for individuals.
Number of Pages in PDF File: 57
Keywords: strategic sophistication, beliefs, experiment, team decision making, individual decision making
JEL Classification: C72, C91, C92
Date posted: February 8, 2010
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