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

57 Pages Posted: 8 Feb 2010  

Matthias Sutter

University of Innsbruck; University of Gothenburg - Department of Economics; IZA Institute of Labor Economics

Simon Czermak

affiliation not provided to SSRN

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)

University of Innsbruck ( email )

Universitaetsstr. 15/4
A-6020, Innsbruck
Austria

University of Gothenburg - Department of Economics ( email )

Box 640
Vasagatan 1, E-building, floor 5 & 6
Göteborg, 40530
Sweden

IZA Institute of Labor Economics

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

Simon Czermak

affiliation not provided to SSRN ( email )

Francesco Feri

University of London ( email )

Senate House
Malet Street
London, WC1E 7HU
United Kingdom

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