Abstract
We examine strategic sophistication using eight two-person 3 × 3 one-shot games. To facilitate strategic thinking, we design a ‘structured’ environment where subjects first assign subjective values to the payoff pairs and state their beliefs about their counterparts’ probable strategies, before selecting their own strategies in light of those deliberations. Our results show that a majority of strategy choices are inconsistent with the equilibrium prediction, and that only just over half of strategy choices constitute best responses to subjects’ stated beliefs. Allowing for other-regarding considerations increases best responding significantly, but the increase is rather small. We further compare patterns of strategies with those made in an ‘unstructured’ environment in which subjects are not specifically directed to think strategically. Our data suggest that structuring the pre-decision deliberation process does not affect strategic sophistication.
Highlights
The experimental game literature has produced a number of studies showing that a substantial proportion of individuals’ strategy choices neither correspond to equilibrium predictions, nor are best responses, as judged according to the beliefweighted values of the available options, especially in environments where games are complex and learning opportunities are limited
In line with previous literature (e.g., Costa-Gomes & Weizsäcker, 2008; Danz et al, 2012; Hoffmann, 2014; Polonio & Coricelli, 2019; Sutter et al, 2013) we find that a sizeable proportion of players do not choose equilibrium strategies, and fail to best respond to their own stated beliefs
We investigate whether accounting for such social preferences increases the proportion of optimal strategies
Summary
The experimental game literature has produced a number of studies showing that a substantial proportion of individuals’ strategy choices neither correspond to equilibrium predictions, nor are best responses, as judged according to the beliefweighted values of the available options, especially in environments where games are complex and learning opportunities are limited (e.g., see Camerer, 2003; Costa-Gomes & Weizsäcker, 2008; Danz et al, 2012; Hoffmann, 2014; Polonio & Coricelli, 2019; Sutter et al, 2013). Once subjects had submitted their rankings, they proceeded automatically to the belief-elicitation task In this task, players were asked to think about the ten players participating in the same session who had been assigned to the role of the other colour and they were asked to state their best estimates about how many of these ten players would choose each of their three possible strategies available to them.. In order to reinforce the effect of previous deliberation on the selected strategy and to control for differences in working memory capacity (see e.g., Devetag et al, 2016), at the time they were choosing their strategy, subjects could see their responses in the ranking and in the belief-elicitation tasks (as shown in Fig. 4), making it as easy as we could for them to think strategically in light of their previous deliberations, if that is what they wished to do. The total average for the Nash equilibrium is calculated over the games with unique equilibrium (excluding Game 2)
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