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Strategic Sophistication of Individuals and Teams in Experimental Normal-Form Games

57 Pages Posted: 8 Feb 2010  

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

Simon Czermak

Management Center Innsbruck (MCI)

Francesco Feri

University of London

Abstract

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.

Keywords: strategic sophistication, beliefs, experiment, team decision making, individual decision making

JEL Classification: C72, C91, C92

Suggested Citation

Sutter, Matthias and Czermak, Simon and Feri, Francesco, Strategic Sophistication of Individuals and Teams in Experimental Normal-Form Games. IZA Discussion Paper No. 4732. Available at SSRN: https://ssrn.com/abstract=1549208

Matthias Sutter (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

Simon Czermak

Management Center Innsbruck (MCI) ( email )

Universitaetsstr. 15
Innsbruck, 6020
Austria

Francesco Feri

University of London ( email )

Senate House
Malet Street
London, WC1E 7HU
United Kingdom

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