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Strategic Teaching and Equilibrium Models of Repeated Trust and Entry Games

Camerer, Colin F. and Ho, Teck H. and Chong, Juin-Kuan and Weigelt, Keith (2002) Strategic Teaching and Equilibrium Models of Repeated Trust and Entry Games. California Institute of Technology , Pasadena, CA.

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This paper tests a model of strategic teaching in repeated trust and entry games with incomplete information. The model assumes 'short-run' players follow a one-parameter learning model (functional experience-weighted attraction). 'Long-run' players either realize how others are learning and ‘teach’ by maximizing their long-run payoff, or always behave honestly or aggressively. For precision, the fraction of honest/aggressive types was first measured in an experiment with one-shot games. Using data from 28 experimental sessions of eight-period trust and entry supergames (25,000 observations), the model fits modestly better than a quantal-response equilibrium benchmark, and both models predict much more accurately than chance. Estimates show most players are sophisticated, and become more sophisticated with experience. Direct measures of subjects' beliefs are weakly correlated with implicit model beliefs, but are extremely accurate and do not show the overconfidence found in many psychological studies.

Item Type:Report or Paper (Report)
Additional Information:This research was supported by NSF grant SES-0078911. Thanks to John Kagel for rapidly supplying data and to Drew Fudenberg, Qi-Zheng Ho, David Hsia, Xin Wang, and two referees for discussions and help. Useful comments were received from seminar participants at Berkeley, Caltech, Chicago, Harvard, Hong Kong UST, New York University, Pittsburgh, Princeton, and Wharton.
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Record Number:CaltechAUTHORS:20110207-093554971
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:22040
Deposited By: Tony Diaz
Deposited On:21 Oct 2011 20:49
Last Modified:26 Dec 2012 12:54

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