Teaching Nash Equilibrium and Strategy Dominance: A Classroom Experiment on the Beauty Contest

Abstract:     
The aim of this investigation is to display how the use of classroom experiments may be a good pedagogical tool to teach the Nash equilibrium (NE) concept. The basic game for our purposes is a repeated version of the Beauty Contest Game (BCG), a simple guessing game whose repetition lets students react to other players' choices and to converge iteratively to the equilibrium solution. We performed this experiment to undergraduated students without any previous knowledge about game theory. After four rounds, we observed in all groups a clear decreasing tendency in the average chosen number. So, our findings prove that, playing a repeated BCG, students learn quickly how to reach the NE solution.

JEL Classifications: A22, C99, D83

Case and Teaching Paper Series