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Game Theory for Playing Games: Sophistication in a Negative-Externality Experiment

15 Pages Posted: 8 Oct 2009  

John M. Spraggon

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics

Robert J. Oxoby

University of Calgary - Department of Economics; IZA Institute of Labor Economics

Abstract

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.

JEL Classification: C72, C91, C92, D63, D64

Suggested Citation

Spraggon, John M. and Oxoby, Robert J., Game Theory for Playing Games: Sophistication in a Negative-Externality Experiment. Economic Inquiry, Vol. 47, Issue 3, pp. 467-481, July 2009. Available at SSRN: https://ssrn.com/abstract=1484224 or http://dx.doi.org/10.1111/j.1465-7295.2008.00146.x

John M. Spraggon (Contact Author)

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics ( email )

Stockbridge Hall
80 Campus Center Way
Amherst, MA 01003-9246
United States

Robert J. Oxoby

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403-220-2586 (Phone)
403-282-5262 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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