Exploitable actions of believers in the “law of small numbers” in repeated constant-sum games |
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Authors: | Steven Scroggin |
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Institution: | Department of Economics 0508, University of California San Diego, 9500 Gilman Drive, La Jolla, CA 92093-0508, USA |
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Abstract: | In repeated fixed-pair constant-sum games with unique equilibria in mixed strategies, such as matching pennies, the subgame perfect equilibrium is repeating the stage-game mixed-strategy equilibrium action. In such games rational players avoid strategies that are exploitable, in that current actions either deviate systematically from the equilibrium action probabilities or fail to be serially independent of past actions. I revisit classic experiments and find that subjects’ actions are sometimes exploitable because they are serially dependent. Subjects have difficulty in producing serially independent actions and in recognizing serially dependent sequences due to a bias called local representativeness. |
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Keywords: | C7 C9 |
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