Information and beliefs in a repeated normal-form game

We study beliefs and actions in a repeated normal-form game. Using a level- k model of limited strategic reasoning and allowing for other-regarding preferences, we classify action and belief choices with regard to their strategic sophistication and study their development over time. In addition to a...

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Bibliographic Details
Published in:Experimental economics : a journal of the Economic Science Association 2012-12, Vol.15 (4), p.622-640
Main Authors: Danz, David N., Fehr, Dietmar, Kübler, Dorothea
Format: Article
Language:English
Subjects:
Behavioral/Experimental Economics
Beliefs
Economic models
Economic statistics
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Equilibrium
Experiments
Feedback
Game Theory
Games
Knowledge
Learning
Microeconomics
Operations Research/Decision Theory
Reasoning
Social and Behav. Sciences
Studies
Trade preferences
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Summary:We study beliefs and actions in a repeated normal-form game. Using a level- k model of limited strategic reasoning and allowing for other-regarding preferences, we classify action and belief choices with regard to their strategic sophistication and study their development over time. In addition to a baseline treatment with common knowledge of the game structure, feedback about actions in the previous period and random matching, we run treatments (i) with fixed matching, (ii) without information about the other player’s payoffs, and (iii) without feedback about previous play. In all treatments with feedback, we observe more strategic play (increasing by 15 percent) and higher-level beliefs (increasing by 18 percent) over time. Without feedback, neither beliefs nor actions reach significantly higher levels of reasoning (with increases of 2 percentage points for actions and 6 percentage points for beliefs). The levels of reasoning reflected in actions and beliefs are highly consistent, but less so for types with lower levels of reasoning.
ISSN:1386-4157
1573-6938
DOI:10.1007/s10683-012-9317-9