Discussion paper
DP11477 Non-equilibrium Play in Centipede Games
Centipede games represent a classic example of a strategic situation, where
the equilibrium prediction is at odds with human behavior. This study is explicitly
designed to discriminate among the proposed explanations for initial
responses in Centipede games. Using many different Centipede games, our approach
determines endogenously whether one or more explanations are empirically
relevant. We find that non-equilibrium behavior is too heterogeneous to
be explained by a single model. However, most non-equilibrium choices can be
fully explained by level-k thinking and quantal response equilibrium but each
model for different subjects. Preference-based models play a negligible role in
explaining non-equilibrium play.
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