Information, Higher-Order Reasoning and Contingent Thinking

Department of Economics and Decision Sciences

Speaker : Ina Taneva (Univ. of Edinburgh)

Room T-014

Abstract:

The assumption of rationality and higher-order reasoning about rationality underpins many models of strategic behavior. We investigate the degree to which this assumption holds in a simple incomplete information game and how that depends on the particular informational environment of the game. The project aims to provide a simple framework for identifying higher-order rationality in incomplete information games and test the implications of different types of information structures on the players’ displayed orders of rationality. We have run a lab experiment and collected data from 115 participants across three treatments, holding the basic game fixed and varying the information structure, where information structures across treatments are ranked in terms of contingent thinking difficulty. We are able to obtain within-subject comparisons of the degree to which more difficult information structures impact the levels of rationality of players.

Joint work with: Brian Rogers