Correlated Beliefs: Predicting Outcomes in 2×2 Games

50 Pages Posted: 10 Apr 2019

See all articles by Timothy N. Cason

Timothy N. Cason

Purdue University - Krannert School of Management

Tridib Sharma

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

Radovan Vadovic

Carleton University

Date Written: February 28, 2019

Abstract

Studies of strategic sophistication in experimental normal form games commonly assume that subjects’ beliefs are consistent with independent choice. This paper examines whether beliefs are consistent with correlated choice. Players play a sequence of simple 2×2 normal form games with distinct opponents and no feedback. Another set of players, called predictors, report a likelihood ranking over possible outcomes. A substantial proportion of the reported rankings are consistent with the predictors believing that the choice of actions in the 2×2 game are correlated. The extent of correlation over action profiles varies systematically between the type of games (i.e., prisoner’s dilemma, stag hunt, coordination, and strictly competitive) as well as the kind of payments within each type of game (i.e., high vs. low deviation payoffs and symmetric vs. asymmetric payoffs.)

Keywords: laboratory experiment; correlation; beliefs; behavior

JEL Classification: C72, C91, D84, D8

Suggested Citation

Cason, Timothy N. and Sharma, Tridib and Vadovic, Radovan, Correlated Beliefs: Predicting Outcomes in 2×2 Games (February 28, 2019). Available at SSRN: https://ssrn.com/abstract=3357586 or http://dx.doi.org/10.2139/ssrn.3357586

Timothy N. Cason

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-1737 (Phone)

Tridib Sharma

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 D.F.
+525 6284197 (Phone)
+525 6284058 (Fax)

Radovan Vadovic (Contact Author)

Carleton University ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

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