Level-K Analysis of Experimental Centipede Games

Kawagoe, Toshiji; Takizawa, Hotaka

doi:10.2139/ssrn.1289514

Cited by 9 publications

(16 citation statements)

References 31 publications

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“…Our study shares similarities with McKelvey andPalfrey (1992, 1995), Zauner (1999), Kawagoe and Takizawa (2012), and Ho and Su (2013) in the sense that all the aforementioned studies fit experimental centipede data to test different preference functionals. McKelvey and Palfrey (1992) provide the first experimental study in centipede games, and compare the performance of a model where every player believes that there is a small chance that their opponent is an altruist.…”

Section: Figuresupporting

confidence: 57%

“…On the other hand, this specification provides a parsimonious way to model behavior according to a Level-k model, given that two parameters are sufficient to describe behavior (the parameter τ for the distribution and a noise parameter λ). Furthermore, the Level-k model with a Poisson distribution appears to provide a good fit (Kawagoe and Takizawa 2012). As a starting point, we assume that the L 0 type is an altruist type who plays Pass at all decision nodes.…”

Section: The Level-k Modelmentioning

confidence: 99%

“…14. The data have been retrieved from the Appendix in Kawagoe and Takizawa (2012). As in Kawagoe and Takizawa (2012), we also exclude the field experiment of Palacios-Huerta and Volij (2009) with chess players, given the remarkably high level of backward induction play.…”

Section: A Datamentioning

confidence: 99%

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Comparing Behavioral Models Using Data From Experimental Centipede Games

Georgalos

2019

Economic Inquiry

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The centipede game posits one of the most well‐known paradoxes of backward induction in the literature of experimental game theory. Given that deviations from the unique subgame perfect Nash equilibrium generates a Pareto improvement, several theoretical models have been employed in order to rationalize this kind of behavior in this social dilemma. The available explanations range from social preferences including fairness, altruism or cooperation motives, errors in playing, inability to perform backward induction or different depths of reasoning. In the present study, we use the Blavatskyy's theoretical contribution, and relax the assumptions of Expected Utility maximization and risk‐neutral attitudes, to test an alternative explanation. We compare various probabilistic decision theory models in terms of their descriptive (in‐sample) and predictive (out‐of‐sample fit) performance, using data from experimental centipede games. We find that introducing non‐Expected Utility preferences to the Quantal Response Equilibrium model, along with a nonlinear utility function, provides a better explanation compared to alternative specifications such as the Level‐k or the Quantal Response Equilibrium model with altruistic motives. (JEL C72, C92, D81, D82)

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Section: Figuresupporting

confidence: 57%

Section: The Level-k Modelmentioning

confidence: 99%

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Comparing Behavioral Models Using Data From Experimental Centipede Games

Georgalos

2019

Economic Inquiry

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“…This has had a major impact on the selection of channel structures and channel expansion by manufacturers (Shimaguchi, Takeuchi, Katahira, & Ishii, 1998). Kawagoe (1980) defined distribution system integration as "a set of actions for securing retailer cooperation in sales of the products by the manufacturer and the organizing of retailers so that manufacturers can realize their own policies as to those sales." However, it is not easy for manufacturers to organize retailers.…”

Section: Introductionmentioning

confidence: 99%

Two sides of management in distribution system integration

Yamashiro

2018

ABAS

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Many motorcycle dealers are family businesses, and they are rather oriented to short-term sales and do not operate only on logic without an emotional stake. Harley-Davidson Japan (HDJ) set up an authorized dealership system made up only of dealers with no capital relationship and did not directly manage dealers. This paper examines the period from 1991 to 2008, when Toshifumi Okui was the CEO of HDJ, during which time HDJ maintained top market share among large motorcycle companies in Japan and was a successful example of distribution system integration for other motorcycle manufacturers. For the dealers to implement HDJ's intentions, the formal side of HDJ's distribution system integration focused on the institutionalization of a "no control sales zero policy" and a "multilayer human relationship building policy." However, critical to these were informal handwritten letters from the top-level management and the "Tokyo Court."

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“…Despite the game's importance for modeling reciprocal relationships as outlined above, no cross-cultural research has been published on the Centipede game so far, and only one study has been conducted using an Asian sample (Kawagoe & Takizawa, 2008). In the context of global business partnerships, of particular interest for comparison are industrialized nations with distinctly different religious and cultural backgrounds including, for example, the United Kingdom contrasted with Japan (Hofstede, 2001b).…”

mentioning

confidence: 99%

Cooperation and Trust in Japanese and British Samples: Evidence From Incomplete Information Games

Krockow

Takezawa

Pulford

et al. 2017

International Perspectives in Psychology

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Most human relationships are characterized by reciprocal patterns of give-and-take that can be studied using a decision making task called the Centipede game. The game involves two players alternating in choosing between cooperation and defection, with their choices affecting payoffs to themselves and the co-player. We compared trust and cooperation of Japanese and UK samples in the Centipede game. To increase the game's applicability to real-life decision situations, we added three treatment conditions to manipulate payoff information. Our betweensubjects design comprised the following four conditions: (a) full payoff information, (b) full payoff information framed as percentages, (c) partial payoff information with absolute (own payoff) information only, and (d) partial payoff information with relative information only. Comparing Japanese and UK students' decisions, the Japanese cooperated significantly more frequently than the British. The manipulation of payoff information also affected decision making. In Japan, both treatment conditions with incomplete information yielded significantly higher cooperation levels than the control. In the UK, only the condition with absolute payoff information produced significantly higher cooperativeness. Overall, these findings suggest that Japanese samples cooperate more frequently in repeated interactions than British samples and that this may be due to the assurance-based trust elicited by reciprocal relationships that has been identified as a typical feature of Japanese culture. In situations with incomplete information, expectations about the stake size may guide decision making, with lower expectations resulting in higher cooperation levels.

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Level-K Analysis of Experimental Centipede Games

Cited by 9 publications

References 31 publications

Comparing Behavioral Models Using Data From Experimental Centipede Games

Comparing Behavioral Models Using Data From Experimental Centipede Games

Two sides of management in distribution system integration

Cooperation and Trust in Japanese and British Samples: Evidence From Incomplete Information Games

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