A mobile experiment on tree construction

Abstract

While a game-theoretic tree is an unrivaled way of representing dynamic interactions, no real-life interaction comes with its tree representation. Before backward inducting, players must construct a tree. We test whether people correctly construct trees. Replicated in 27 different settings with 5,001 subjects from 133 countries, the test shows that between 13% and 63% of subjects fail at tree construction. Our result is detrimental to the internal validity of testing backward induction. We also argue that tree construction is more challenging than backward induction. Data comes from Blues and Reds, a mobile app that functions as an experiment.

Keywords: dynamic games, tree construction, backward induction, experimental game theory, mobile experiment

JEL Classification: C72, C99, D91