Level-k reasoning in a generalized beauty contest |
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Institution: | 1. CREST, Ecole Polytechnique, Institute Polytechnique of Paris, France;2. Léonard de Vinci Pôle Universitaire, Research Center, 92916, Paris La Défense France |
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Abstract: | We study how the predictive power of level-k models changes as we perturb the classical beauty contest setting along two dimensions: the strength of the coordination motive and the information symmetry. We use a variation of the Morris and Shin (2002) model as the unified framework for our study, and find that the predictive power of level-k models varies considerably along these two dimensions. Level-k models are successful in predicting subject behavior in settings with symmetric information and a strong coordination motive. Their predictive power weakens significantly when either private information is introduced or the importance of the coordination motive is decreased. |
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Keywords: | Beauty contests Coordination games |
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