European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

Cognitive Hierarchies in the Minimizer Game

Ulrich Berger (), Hannelore De Silva () and Gerlinde Fellner-Röhling ()
Additional contact information
Ulrich Berger: Department of Economics, Vienna University of Economics and Business
Hannelore De Silva: Department Finance, Accounting and Statistics , Vienna University of Economics and Business
Gerlinde Fellner-Röhling: Institute of Economics, Ulm University

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

JEL-codes: C72; C90; D01; D83 January 2016

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