Cognition and Behavior in Normal-Form Games: An Experimental Study

Abstract

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. Subjects played normal-form games with various patterns of iterated dominance and unique pure-strategy equilibria without dominance, using a computer interface that allowed them to look up hidden payoffs as often as desired, one at a time, while recording their look-up sequences. Monitoring subjects' information searches along with their decisions allows us more precisely to identify their decision rules, and subjects' deviations from the search patterns suggested by equilibrium analysis help to predict their deviations from equilibrium decisions.

JEL Classification: C72, C92, C51