Rights statement: This is the peer reviewed version of the following article: Georgalos, K. (2019), COMPARING BEHAVIORAL MODELS USING DATA FROM EXPERIMENTAL CENTIPEDE GAMES. Econ Inq. doi:10.1111/ecin.12803 which has been published in final form at https://onlinelibrary.wiley.com/doi/full/10.1111/ecin.12803 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Comparing Behavioural Models Using Data from Experimental Centipede Games
AU - Georgalos, Konstantinos
N1 - This is the peer reviewed version of the following article: Georgalos, K. (2019), COMPARING BEHAVIORAL MODELS USING DATA FROM EXPERIMENTAL CENTIPEDE GAMES. Econ Inq. doi:10.1111/ecin.12803 which has been published in final form at https://onlinelibrary.wiley.com/doi/full/10.1111/ecin.12803 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
PY - 2020/1/1
Y1 - 2020/1/1
N2 - 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).
AB - 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).
U2 - 10.1111/ecin.12803
DO - 10.1111/ecin.12803
M3 - Journal article
VL - 58
SP - 34
EP - 48
JO - Economic Inquiry
JF - Economic Inquiry
SN - 0095-2583
IS - 1
ER -