Representation effects in the centipede game

Abstract

We explore the effects on strategic behavior of alternative representations of a centipede game that differ in terms of complexity. In a laboratory experiment, we manipulate the way in which payoffs are presented to subjects in two different ways. In both cases, information is made less accessible relative to the standard representation of the game. Results show that these manipulations shift the distribution of take nodes further away from the equilibrium prediction. The evidence is consistent with the view that failures of game-form recognition and the resulting limits to strategic reasoning are crucial for explaining non-equilibrium behavior in the centipede game.

A Resolution of the Centipede Paradox

“…A di¢ culty is that the most preferred end nodes do not coincide; here, IM prevents cooperation: Thus, it is still a germ of cooperation. This fact 9 Crosetto-Mantovani [3] studied the example given as (g1(zt); g2(zt)) = (4t; t) if t is odd and (2t; 4t) if t is even. This formula itself is linear, but the game is an sk-convex centipede game.…”