If you could read my mind\u2013an experimental beauty-contest game with children

Henning Hermes,Daniel Schunk

doi:10.1007/s10683-021-09713-y

Henning Hermes, Daniel Schunk

Open Access

https://doi.org/10.1007/s10683-021-09713-y

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Abstract

We develop a new design for the experimental beauty-contest game (BCG) that is suitable for children in school age and test it with 114 schoolchildren aged 9–11 years as well as with adults. In addition, we collect a measure for cognitive skills to link these abilities with successful performance in the game. Results demonstrate that children can successfully understand and play a BCG. Choices start at a slightly higher level than those of adults but learning over time and depth of reasoning are largely comparable with the results of studies run with adults. Cognitive skills, measured as fluid IQ, are predictive only of whether children choose weakly dominated strategies but are neither associated with lower choices in the first round nor with successful performance in the BCG. In the implementation of our new design of the BCG with adults we find results largely in line with behavior in the classical BCG. Our new design for the experimental BCG allows to study the development of strategic interaction skills starting already in school age.

Highlights

An important skill for economic actors is the ability to anticipate the actions of others in strategic settings and to choose one’s own actions
We simplify the experimental beauty-contest game (BCG) into a board game—we make it less abstract, provide concrete and visually illustrated operations with a spatial interpretation corresponding to each step in the game, and use the median, integers (0–100), p = 1∕2, and only five players per group. Applying this new design for the experimental BCG, we study the behavior of n = 114 children aged 9–11 years in the game and demonstrate that they are capable of successfully playing an experimental BCG
We first provide descriptive evidence to support that children successfully understood and played a strategic interaction game in the form of an experimental BCG

Summary

Introduction

An important skill for economic actors is the ability to anticipate the actions of others in strategic settings and to choose one’s own actions . There is a very wide range of situations in which these strategic interaction skills are crucial.1 In their well-known study on signaling games, Cooper and Kagel (2005) argue, based on recording and coding of the dialogues of experimental participants, that “a critical step in monopolists’ learning to play strategically is putting themselves in the entrant’s shoes, reasoning from the entrant’s point of view to infer likely responses to their choice as a monopolist.”. Empirical evidence demonstrates that individual investors base their investment decisions on their beliefs about the return expectations of other investors (Rangvid et al, 2013; Egan et al, 2014) Another example are most forms of matching markets; Braun et al (2014) show this in the context of a laboratory study that investigates students’ behavior in university admissions procedures. The dynamics and outcomes of weakest-link games, representing, for example, coordination problems in a firm, depend on the players’ ability to anticipate the actions of their peers (e.g., Brandts and Cooper, 2006)

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