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Department of Economics, WU (Wirtschaftsuniversität Wien) Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)

No 211:
Cognitive Hierarchies in the Minimizer Game

Ulrich Berger (), Hannelore De Silva () and Gerlinde Fellner-Röhling ()

Abstract: Experimental tests of choice predictions in one-shot games show only little support for Nash equilibrium (NE). Poisson Cognitive Hierarchy (PCH) and level-k (LK) are behavioral models of the thinking-steps variety where subjects differ in the number of levels of iterated reasoning they perform. Camerer et al. (2004) claim that substituting the Poisson parameter tau = 1.5 yields a parameter-free PCH model (pfPCH) which predicts experimental data considerably better than NE. We design a new multi-person game, the Minimizer Game, as a testbed to compare initial choice predictions of NE, pfPCH and LK. Data obtained from two large-scale online experiments strongly reject NE and LK, but are well in line with the point prediction of pfPCH.

Keywords: behavioral game theory, experimental games, Poisson cognitive hierarchy, level-k model, minimizer game; (follow links to similar papers)

JEL-Codes: C72,; C90,; D01,; D83; (follow links to similar papers)

January 2016

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