Revealing the Depth of Reasoning in P-Beauty Contest Games

Abstract

The aim of this study is to evaluate the importance of the information about levels of reasoning on the individual's choices. I report the results from a series of experiments on p-beauty contest games with different subjects' pools and different information treatments. In experiments 2, 3 and 4, the winner(s) explained what reasoning he/she applied in choosing the target number. In each period, he/she wrote a short message (30 words maximum) and then stopped playing. The winner's message, and the winning number, were therefore displayed on all computer screens. In these sessions, therefore, subjects were informed on T, M (the target and value of the average in the previous period) and W (the level of reasoning of the winner in the previous period). In both the baseline sessions (S1 and S5), subjects were informed only on the values of T and M. The experimental evidence shows that non-winning players imitate the level of rationality of the winners, and there is a relevant proportion (Session 3 and 4) of the population who adopt strategies which are best responses to the imitators' behaviour rather than to the average level of rationality. Both the imitative strategies and the best responses to the imitative strategies produce a strong acceleration of the learning process.

JEL Classification: C72, C91, C92