Equilibrium refinement vs. level-k analysis: An experimental study of cheap-talk games with private information

Kawagoe, Toshiji; Takizawa, Hotaka

doi:10.1016/j.geb.2008.04.008

Cited by 82 publications

(53 citation statements)

References 37 publications

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“…In fact, level-k model has so far been applied mostly to normal-form games (a few exceptions are Johnson et al, 2002 andKawagoe andTakizawa, 2009). We show in this paper that application of level-k model to extensive-form games may prove to be useful.…”

Section: Resultsmentioning

confidence: 99%

Level-K Analysis of Experimental Centipede Games

Kawagoe

Takizawa

2008

SSRN Journal

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The centipede game is one of the most celebrated examples of the paradox of Focusing on the initial responses, this paper attempts to offer another explanation for the observed deviations by using level-k analysis, a non-equilibrium model of strategic thinking. We show that level-k analysis gives consistently good predictions for the experimental centipede games. The results suggest that experimental results of centipede games be explained without resorting to fairness concern or altruism.

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Section: Resultsmentioning

confidence: 99%

Level-K Analysis of Experimental Centipede Games

Kawagoe

Takizawa

2008

SSRN Journal

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“…The Level-k model has also been applied successfully to a variety of other games, including "hide-and-seek" games [27], incomplete-information betting games [11], betting games and matrix games [57], coordinated attack games [48], sender-receiver games augmented with eye-tracking data [65], and cheap-talk games [45]. In the field, Level-k has been shown to fit behavior in Swedish lowest-unique-positive-integer lottery games [55] and to explain the fact that movies that were not released to critics before their public opening earn higher revenues [12].…”

Section: Review Of Relevant Literaturementioning

confidence: 99%

On the persistence of strategic sophistication

Georganas

Healy

Weber

2015

Journal of Economic Theory

119

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ABSTRACT. We examine whether the "Level-k" model of strategic behavior generates reliable cross-game predictions at the individual level. We find no correlation in subjects' estimated levels of reasoning across two families of games. Furthermore, estimating a higher level for Ann than Bob in one family of games does not predict their ranking in the other. Direct tests of strategic reasoning generally do not predict estimated levels. Within families of games, we find that levels are fairly consistent within one family, but not the other. Our results suggest that the use of Level-k reasoning varies by game, making prediction difficult.

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“…Although from player 9 Recently, Erik Wengström (2008) has applied the level-k model to study communication in a price competition game. Hongbin Cai and Joseph Tao-Yi Wang (2006), Takizawa (2009) andWang, Michael Spezio and have adapted Crawford's model to study one-sided cheap talk in sender-receiver games with private information.…”

Section: Modelmentioning

confidence: 99%

When Does Communication Improve Coordination?

Ellingsen

Östling

2010

American Economic Review

115

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We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of pre-play communication in symmetric 2 2 games. One-way communication weakly increases coordination on Nash equilibrium outcomes, although average payoffs sometimes decrease. Twoway communication further improves payoffs in some games, but is detrimental in others. Moving beyond the class of symmetric 2 2 games, we nd that communication facilitates coordination in common interest games with positive spillovers and strategic complementarities, but there are also games in which any type of communication hampers coordination. JEL: C72. Keywords: Pre-play communication, cheap talk, coordination, level-k, cognitive hierarchy.Some people nd themselves in a new strategic situation. How can they best coordinate their actions? Since they cannot rely on precedence, maybe they should start talking? If so, what are the exact reasons why communication helps? These fundamental questions crop up in many disciplines, including evolutionary biology, psychology, political science, and economics. 1 Farrell (1987, 1988) and Matthew Rabin (1990Rabin ( , 1994 provide formal analyses of costless communication, or cheap talk, as a means to convey intentions and thereby improve coordination among rational players in games with complete information. 2 While the models are insightful, we argue that they make problematic assumptions concerning players' beliefs, and that recent models of strategic thinking offer alternative assumptions that better t our intuitions and the available experimental evidence.To put our arguments into perspective, let us brie y review some of the literature. Farrell (1987) studies communication in a Battle of the Sexes game (Figure 1). Farrell assumes that behavior will correspond to the symmetric mixed strategy Nash equilibrium if players cannot communicate. He also assumes that message pairs ."H ";"L"/ and ."L";"H "/ that are consistent with a pure strategy equilibrium will induce play of that equilibrium. Based on these assumptions, he shows that with two-way communication there are better symmetric mixed strategy equilibria than the no-communication equilibrium. Payoffs improve with the number of communication Ellingsen:

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Equilibrium refinement vs. level-k analysis: An experimental study of cheap-talk games with private information

Cited by 82 publications

References 37 publications

Level-K Analysis of Experimental Centipede Games

Level-K Analysis of Experimental Centipede Games

On the persistence of strategic sophistication

When Does Communication Improve Coordination?

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