nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2006‒03‒05
one paper chosen by
Matthew Baker
US Naval Academy, USA

  1. Rationalizing Irrational Beliefs By Geoffrey Dunbar; Juan Tu; Ruqu Wang; Xiaoting Wang

  1. By: Geoffrey Dunbar (Simon Fraser University); Juan Tu (Queen's University); Ruqu Wang (Queen's University); Xiaoting Wang (Brock University)
    Abstract: In this paper, we re-examine various previous experimental studies of the Centipede Game in the literature. These experiments found that players rarely follow the subgame-perfect equilibrium strategies of the game, and various modifications to the game were proposed to explain the outcomes of the experiments. We here offer yet another modification. Players have a choice of whether or not to believe that their opponents use subgame-perfect equilibrium strategies. We define a `behavioral equilibrium' for this game. This equilibrium concept can reproduce the outcomes of those experiments.
    Keywords: centipede games, game theory, experimental economics, behavioral economics
    JEL: C72 C91
    Date: 2006–02

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