Forward Induction: Thinking and Behavior

31 Pages Posted: 9 Mar 2015 Last revised: 17 Jun 2016

See all articles by Piotr Evdokimov

Piotr Evdokimov

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Investigacion Economica

Aldo Rustichini

University of Minnesota - Twin Cities - Department of Economics

Date Written: April 30, 2016

Abstract

Forward induction (FI) thinking is a theoretical concept in the Nash refinement literature which suggests that earlier moves by a player may communicate his future intentions to other players in the game. Whether and how much players use FI in the laboratory is still an open question. We designed an experiment in which detailed reports were elicited from participants playing a battle of the sexes game with an outside option. Many of the reports show an excellent understanding of FI, and such reports are associated more strongly with FI-like behavior than reports consistent with first mover advantage and other reasoning processes. We find that a small fraction of subjects understands FI but lacks confidence in others. We also explore individual differences in behavior. Our results suggest that FI is relevant for explaining behavior in games.

Keywords: forward, induction, experiment

JEL Classification: C72, D01, C91

Suggested Citation

Evdokimov, Piotr and Rustichini, Aldo, Forward Induction: Thinking and Behavior (April 30, 2016). Journal of Economic Behavior and Organization, Vol. 128, 2016. Available at SSRN: https://ssrn.com/abstract=2575476 or http://dx.doi.org/10.2139/ssrn.2575476

Piotr Evdokimov (Contact Author)

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Investigacion Economica ( email )

Av. Camino a Santa Teresa #930
Col. Heroes de Padierna
Mexico City, D.F. 10370
Mexico

Aldo Rustichini

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

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