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Cognition and Behavior in Two-Person Guessing Games: An Experimental Study

By A. Costa-gomes, Vincent P. Crawford, Tatsuyoshi Saijo, Jason Shachat, Joel Sobel and Two Refer

Abstract

"... professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one's judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees." —John Maynard Keynes, The General Theory of Employment, Interest, and Money This paper reports an experiment that elicits subjects ' initial responses to 16 dominancesolvable two-person guessing games. The structure is publicly announced except for varying payoff parameters, to which subjects are given free access. Varying the parameters allows very strong separation of the behavior implied by leading decision rules. Subjects ' decisions an

Topics: noncooperative games, experimental economics, guessing games, bounded rationality, cognition, information search (JEL C72, C92, C51
Year: 2004
OAI identifier: oai:CiteSeerX.psu:10.1.1.190.2091
Provided by: CiteSeerX
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