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A cognitive hierarchy model of games

Camerer, Colin F. and Ho, Teck-Hua and Chong, Juin-Kuan (2004) A cognitive hierarchy model of games. Quarterly Journal of Economics, 119 (3). pp. 861-898. ISSN 0033-5533. http://resolver.caltech.edu/CaltechAUTHORS:20110210-084722768

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Abstract

Players in a game are “in equilibrium” if they are rational, and accurately predict other players' strategies. In many experiments, however, players are not in equilibrium. An alternative is “cognitive hierarchy” (CH) theory, where each player assumes that his strategy is the most sophisticated. The CH model has inductively defined strategic categories: step 0 players randomize; and step k thinkers best-respond, assuming that other players are distributed over step 0 through step k − 1. This model fits empirical data, and explains why equilibrium theory predicts behavior well in some games and poorly in others. An average of 1.5 steps fits data from many games.


Item Type:Article
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http://dx.doi.org/10.1162/0033553041502225DOIUNSPECIFIED
http://www.mitpressjournals.org/doi/abs/10.1162/0033553041502225PublisherUNSPECIFIED
Additional Information:© 2004 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. Posted Online March 13, 2006. This research was supported by NSF grants SES-0078911 and SES-0078853. Thanks to C. Mónica Capra, Haitao Cui, Paul Glimcher, and Roger Myerson. Sara Robinson was a helpful wordsmith. Former math nerd Matthew Rabin directed our attention to the golden ratio. Meghana Bhatt, Ming Hsu, Ye Li, Brian Rogers, and Lisa Wang provided excellent research assistance. Useful comments were received from seminars at University of California at Berkeley, California Institute of Technology, University of Chicago, Carnegie Mellon University, Columbia University, Harvard University, New York University, University of Pittsburgh, Stanford University, the Nobel Symposium in Sweden (December 2001), and from four referees and an unusually helpful editor (Edward Glaeser).
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NSFSES-0078911
NSFSES-0078853
Record Number:CaltechAUTHORS:20110210-084722768
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20110210-084722768
Official Citation:Camerer, C. F., T.-H. Ho, et al. (2004). "A Cognitive Hierarchy Model of Games*." Quarterly Journal of Economics 119(3): 861-898.
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:22104
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:14 Feb 2011 19:24
Last Modified:26 Dec 2012 12:55

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