Games and Phone Numbers: Do Short Term Memory Bounds Affect Strategic Behavior?

Posted: 27 Apr 2005

See all articles by Giovanna Devetag

Giovanna Devetag

Luiss Guido Carli

Massimo Warglien

University of Venice - Department of Business Economics & Management

Abstract

Research in experimental and behavioral game theory has revealed a substantial and persistent degree of heterogeneity in the strategic behavior of real individuals. While the prevailing theoretical explanations of the observed heterogeneity typically invoke underlying differences in beliefs among the population of players, we argue that a further source of heterogeneity may consist in the individuals' different ability to process information, of which short term memory capacity provides a measurable proxy. Research in cognitive psychology has shown that individuals typically differ in their short term memory capacity; furthermore, short term memory capacity provides a fundamental cognitive bottleneck to our ability to process information efficiently and hence seems correlated with performance in a variety of problem solving and reasoning tasks. In this paper we conduct experiments on a set of well-known games whose solution concepts require the application of some paradigmatic forms of strategic reasoning, such as iterated dominance, reasoning about common knowledge and backward induction. We separately conduct standard short term memory tests on our subjects to detect the presence of a correlation between individuals' behavior in the games - here defined in terms of degrees of conformity to the standard game-theoretic prescriptions - and their short term memory score. Our results show the presence of a significant and positive correlation between subjects' short term memory score and conformity to standard game-theoretic prescriptions in the games, thus confirming our hypothesis. While the robustness of our conjecture awaits to be confirmed by further data gathering in more interactive experimental settings, our preliminary results suggest a promising line of inquiry on the interconnections between information processing capacity and strategic behavior.

Keywords: short term memory, information processing, iterated reasoning, heterogeneity

JEL Classification: C72, C91

Suggested Citation

Devetag, Giovanna and Warglien, Massimo, Games and Phone Numbers: Do Short Term Memory Bounds Affect Strategic Behavior?. Journal of Economic Psychology, Vol. 24, No. 2, pp. 189-202, April 2003. Available at SSRN: https://ssrn.com/abstract=705724

Giovanna Devetag (Contact Author)

Luiss Guido Carli ( email )

Via Salvini 2
Roma, 00197
Italy

Massimo Warglien

University of Venice - Department of Business Economics & Management ( email )

Dorsoduro 3246
Venezia VE 30121, Veneto 30123
Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
908
PlumX Metrics