Forward Induction: Thinking and Behavior
31 Pages Posted: 9 Mar 2015 Last revised: 17 Jun 2016
Date Written: April 30, 2016
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: Suggested Citation