An Experimental Study of the Centipede Game
TLDR
In this paper, the authors consider the centipede game as a game of incomplete information, in which there is some uncertainty over the payoff functions of the players, and investigate how well a version of this model explains the data observed in the Centipede experiments.Abstract:
We report on an experiment in which individuals play a version of the centipede game. In this game, two players alternately get a chance to take the larger portion of a continually escalating pile of money. As soon as one person takes, the game ends with that player getting the larger portion of the pile, and the other player getting the smaller portion. If one views the experiment as a complete information game, all standard game theoretic equilibrium concepts predict the first mover should take the large pile on the first round. The experimental results show that this does not occur. An alternative explanation for the data can be given if we reconsider the game as a game of incomplete information in which there is some uncertainty over the payoff functions of the players. In particular, if the subjects believe there is some small likelihood that the opponent is an altruist, then in the equilibrium of this incomplete information game, players adopt mixed strategies in the early rounds of the experiment, with the probability of taking increasing as the pile gets larger. We investigate how well a version of this model explains the data observed in the centipede experiments.read more
Citations
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ERC: A Theory of Equity, Reciprocity, and Competition
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A Behavioral Approach to the Rational Choice Theory of Collective Action: Presidential Address, American Political Science Association, 1997
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A theory of reciprocity
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References
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TL;DR: The authors reexamine Selten's model, adding to it a small amount of imperfect (or incomplete) information about players' payoffs, and find that this addition is sufficient to give rise to the reputation effect that one intuitively expects.
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