Rational Reasoning or Adaptive Behavior? Evidence from Two-Person Beauty Contest Games

27 Pages Posted: 9 Oct 2001

See all articles by Brit Grosskopf

Brit Grosskopf

University of Exeter Business School - Department of Economics

Rosemarie Nagel

Universitat Pompeu Fabra - Department of Economics

Date Written: June 2007

Abstract

Many experiments have shown that human subjects do not necessarily behave in line with game theoretic assumptions and solution concepts. The reasons for this non-conformity are multiple. In this paper we study the argument whether a deviation from game theory is because subjects are rational, but doubt that others are rational as well, compared to the argument that subjects, in general, are boundedly rational themselves. To distinguish these two hypotheses, we study behavior in repeated 2-person and many-person Beauty- Contest-Games which are strategically different from one another. We analyze four different treatments and observe that convergence toward equilibrium is driven by learning through the information about the other player's choice and adaptation rather than self-initiated rational reasoning.

Keywords: Beauty contest, Guessing game, Bounded rationality, Weak dominance, Learning

JEL Classification: C7, C9

Suggested Citation

Grosskopf, Brit and Nagel, Rosemarie, Rational Reasoning or Adaptive Behavior? Evidence from Two-Person Beauty Contest Games (June 2007). Harvard NOM Research Paper No. 01-09. Available at SSRN: https://ssrn.com/abstract=286573 or http://dx.doi.org/10.2139/ssrn.286573

Brit Grosskopf (Contact Author)

University of Exeter Business School - Department of Economics ( email )

Streatham Court
Exeter, EX4 4RJ
United Kingdom

Rosemarie Nagel

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)

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