One, Two, (Three), Infinity: Newspaper and Lab Beauty-Contest Experiments

Univ. Pompeu Fabra, Economics and Business Working Paper No. 438

34 Pages Posted: 29 Jun 2000

See all articles by Rosemarie Nagel

Rosemarie Nagel

Universitat Pompeu Fabra - Department of Economics

Antoni Bosch i Domènech

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Albert Satorra

Universitat Pompeu Fabra

José García Montalvo

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Abstract

Beauty-contest" is a game in which participants have to choose, typically, a number in [0,100], the winner being the person whose number is closest to a proportion of the average of all chosen numbers. We describe and analyze Beauty-contest experiments run in newspapers in UK, Spain, and Germany and find stable patterns of behavior across them, despite the uncontrollability of these experiments. These results are then compared with lab experiments involving undergraduates and game theorists as subjects, in what must be one of the largest empirical corroborations of interactive behavior ever tried. We claim that all observed behavior, across a wide variety of treatments and subject pools, can be interpreted as iterative reasoning. Level-1 reasoning, Level-2 reasoning and Level-3 reasoning are commonly observed in all the samples, while the equilibrium choice (Level-Maximum reasoning) is only prominently chosen by newspaper readers and theorists. The results show the empirical power of experiments run with large subject-pools, and open the door for more experimental work performed on the rich platform offered by newspapers and magazines.

JEL Classification: C7, C9

Suggested Citation

Nagel, Rosemarie and Bosch i Domènech, Antoni and Satorra, Albert and García Montalvo, José, One, Two, (Three), Infinity: Newspaper and Lab Beauty-Contest Experiments. Univ. Pompeu Fabra, Economics and Business Working Paper No. 438. Available at SSRN: https://ssrn.com/abstract=224572 or http://dx.doi.org/10.2139/ssrn.224572

Rosemarie Nagel (Contact Author)

Universitat Pompeu Fabra - Department of Economics ( email )

Ramon Trias Fargas 25-27
08005 Barcelona
Spain
+34 93 542 3729 (Phone)
+34 93 542 1746 (Fax)

Antoni Bosch i Domènech

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 28 (Phone)
(34-93) 542 17 46 (Fax)

Albert Satorra

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 17 58 (Phone)
(34-93) 542 17 46 (Fax)

José García Montalvo

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

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