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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 671:
Testing Game Theory in the Field: Swedish LUPI Lottery Games

Robert Ístling (), Joseph Tao-yi Wang (), Eileen Chou () and Colin F. Camerer ()

Abstract: Game theory is usually difficult to test precisely in the field because predictions typically depend sensitively on features that are not controlled or observed. We conduct one such test using field data from the Swedish lowest unique positive integer (LUPI) game. In the LUPI game, players pick positive integers and whoever chose the lowest unique number wins a fixed prize. Theoretical equilibrium predictions are derived assuming Poisson-distributed uncertainty about the number of players, and tested using both field and laboratory data. The field and lab data show similar patterns. Despite various deviations from equilibrium, there is a surprising degree of convergence toward equilibrium. Some of the deviations from equilibrium can be rationalized by a cognitive hierarchy model.

Keywords: Population uncertainty; Poisson game; guessing game; experimental methods; behavioral game theory; level-k; cognitive hierarchy; (follow links to similar papers)

JEL-Codes: C72; C92; C93; L83; (follow links to similar papers)

49 pages, August 14, 2007, Revised December 15, 2010

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Published as Ístling, Robert, Joseph Tao-yi Wang, Eileen Chou and Colin F. Camerer, 'Testing Game Theory in the Field: Swedish LUPI Lottery Games' in American Economic Journal: Microeconomics, 2011, pages 1-33.

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