DP14088 Naivete and Sophistication in Initial and Repeated Play in Games

Author(s): Bernardo Garcia-Pola, Nagore Iriberri
Publication Date: October 2019
Keyword(s): adaptive and sophisticated learning, initial play, level-k thinking, mixture-of-types estimation, Naivete, repeated play, Sophistication
JEL(s): C70, C91, C92
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14088

Naive, non-equilibrium, behavioral rules, compared to more sophisticated equilibrium theory, are often better in describing individuals' initial play in games. Additionally, in repeated play in games, when individuals have the oppor- tunity to learn about their opponents' past behavior, learning models of different sophistication levels are successful in explaining how individuals modify their behavior in response to feedback. How do subjects following different behavioral rules in initial play modify their behavior after learning about past behavior? This study links both initial and repeated play in games, analyzing elicited behavior in 3x3 normal-form games using a within-subject laboratory design. We classify individuals into different behavioral rules in both initial and repeated play and test whether and/or how naivete and sophistication in initial play correlates with naivete and sophistication in repeated play. We find no evidence for a correlation between naivete and sophistication in initial and repeated play.