Abstract

http://ssrn.com/abstract=2089522
 
 

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Level-K Reasoning in a Generalized Beauty Contest


Dmitry Shapiro


University of North Carolina at Charlotte - The Belk College of Business Administration - Department of Economics

Xianwen Shi


University of Toronto - Department of Economics

Artie Zillante


University of North Carolina (UNC) at Charlotte

August 31, 2011


Abstract:     
We study how the predictive power of level-k models changes as we perturb the classical beauty contest setting along two dimensions: the strength of the coordination motive and the information symmetry. We use a variation of the Morris and Shin (2002) model as the unified framework for our study, and find that the predictive power of level-k models varies considerably along these two dimensions. Level-k models are successful in predicting subject behavior in settings with symmetric information and a strong coordination motive. However, the predictive power of level-k models is significantly weakened when private information is introduced or the importance of the coordination motive is decreased.

Number of Pages in PDF File: 30

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Date posted: June 22, 2012 ; Last revised: March 19, 2013

Suggested Citation

Shapiro, Dmitry and Shi, Xianwen and Zillante, Artie, Level-K Reasoning in a Generalized Beauty Contest (August 31, 2011). Available at SSRN: http://ssrn.com/abstract=2089522 or http://dx.doi.org/10.2139/ssrn.2089522

Contact Information

Dmitry Shapiro (Contact Author)
University of North Carolina at Charlotte - The Belk College of Business Administration - Department of Economics ( email )
Charlotte, NC 28223
United States
Xianwen Shi
University of Toronto - Department of Economics ( email )
150 St. George Street
Toronto, Ontario M5S 3G3
Canada
HOME PAGE: http://individual.utoronto.ca/xianwenshi/
Artie Zillante
University of North Carolina (UNC) at Charlotte ( email )
9201 University City Boulevard
Charlotte, NC 28223
United States
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