GAME THEORY

Methodological Stuff Matching of players Strategy method Infinitely repeated games Beliefs

Coordination Games E.g. entry into markets Pure matching games Mixed-motive games (different preferences over coordinated outcome) Minimum effort games

General Results Pure matching games, “focal points” are important Mixed-motive coordination games=> Players tend to play close to the MSNE (less efficient than coordinating) One-way communication helps, two-way doesn’t. Outside options can help.

Order Statistic Games Payoff depends on own choice & on an order statistic (e.g. mean, median of all choices etc.) Stag hunt, whale hunters in Indonesia etc. Weakest-link games, production (e.g. restaurant wait times, group projects, airlines) “Strategic complementarities”=> The marginal productivity of action increases with the level of another’s action.

Your Results

Your Results (cont’d)

The Effects of Group Size and Matching Groups of 2, partner matching, 7 periods. 10 of 12 pairs reached the efficient minimum of 7. Groups of 2, random rematching (stranger protocol)—converged to 1, just like in large groups (14-16 people). Group size has large impact on outcomes

Minimum Effort Coordination Games Goeree & Holt (2005): 10-12 subjects paired for 10 rounds 3 sessions with c=0.25 3 sessions with c=0.75

Continental Divide

Centipede Game

Palacios-Huerta & Volij (2009) JUDITH POLGAR

Matching Pennies Professional Spanish football players

Beauty Contest Games

Beauty Contest Games—Keynes’ Quote

Dominance-Solvable Games

Your Data

Bosch-Domènech, Montalvo, Nagel, and Satorra (2002) report results from a series of newspaper experiments with the guessing game (p = 2/3). In spite of the lack of control, the newspaper experiments look remarkably similar to the laboratory experiments with spikes at 33, 22, and 0. Subjects who were able to correctly describe the Nash equilibrium generally (81%) did not choose zero. Subjects who conducted their own experiments did better than game theorists or the general public at predicting the winning number

Conclusions