Abstract
Strategic thinking, best-response, and mutual consistency (equilibrium) are three key modeling principles in non-cooperative game theory. Camerer, Ho and Chong (2004) relax mutual consistency to predict how players are likely to behave in one-shot games before they can learn to equilibrate. They introduce a one-parameter cognitive hierarchy (CH) model to predict behavior in one-shot games, and initial conditions in repeated games. The CH approach assumes that players use k steps of reasoning with frequency f(k). Camerer, Ho and Chong (2004) assume f(k) to be a one-parameter Poisson distribution.
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