Tree Construction and Backward Induction: A Mobile Experiment
71 Pages Posted: 31 May 2018 Last revised: 12 Jun 2018
Date Written: May 19, 2018
Game theory is a collection of tools to analyze interactive situations. We focus on two fundamental tools employed in the context of dynamic games: tree construction (modeling reality in its simpliﬁed form) and backward induction (solving the tree in terms of strategy proﬁles). We ask whether these tools work; that is, whether people behave as if they were constructing trees and backward inducting. We ﬁnd that sometimes these tools work and proceed to explain when and why they fail. We ﬁnd two key forces: subject’s skills and complexity of interaction. We show how to measure skills and complexity. We also analyze the relationship between the structure of interaction and its complexity. Finally, we compare the relative importance of skills and complexity in terms of increasing the likelihood of subjects constructing a tree and backward inducting. In order to collect the data, we conduct a mobile experiment: we developed the mobile game Blues and Reds that is available for free for both iOS and Android devices.
Keywords: game theory; mobile experiment; tree construction; backward induction
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