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Iterated dominance and iterated best response in experimental "p-beauty contests"

Ho, Teck-Hua and Camerer, Colin F. and Weigelt, Keith (1998) Iterated dominance and iterated best response in experimental "p-beauty contests". American Economic Review, 88 (4). pp. 947-969. ISSN 0002-8282.

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Picture a thin country 1000 miles long, running north and south, like Chile. Several natural attractions are located at the northern tip of the country. Suppose each of n resort developers plans to locate a resort somewhere on the country's coast (and all spots are equally attractive). After all the resort locations are chosen, an airport will be built to serve tourists, at the average of all the locations including the natural attractions. Suppose most tourists visit all the resorts equally often, except for lazy tourists who visit only the resort closest to the airport; so the developer who locates closest to the airport gets a fixed bonus of extra visitors. Where should the developer locate to be nearest to the airport? The surprising game-theoretic answer is that all the developers should locate exactly where the natural attractions are. This answer requires at least one natural attraction at the northern tip, but does not depend on the fraction of lazy tourists or the number of developers (as long as there is more than one).

Item Type:Article
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URLURL TypeDescription ItemWorking Paper
Ho, Teck-Hua0000-0001-5210-4977
Camerer, Colin F.0000-0003-4049-1871
Alternate Title:Iterated Dominance and Iterated Best-Response in Experimental P-Beauty Contests
Additional Information:© 1998 American Economic Association. Ho and Camerer were sponsored in part by National Science Foundation Grants Nos. SBR 95-11137 and SBR-9511001 and Weigelt by Wharton's Reginald Jones Center for Policy, Strategy, and Organization. We thank two very patient anonymous referees, Susanna Lohmann, Rosemarie Nagel, Lisa Ruitstrom, Dale Stahl, and seminar participants at the University of Pennsylvania, UCLA, the MacArthur Foundation Preferences Group, the 1996 Economic Science Association meetings, and the UCLA Running Dogs Seminar for helpful comments. Hongjai Rhee provided excellent tireless research assistance.
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NSFSBR 95-11137
Wharton School, University of PennsylvaniaUNSPECIFIED
Issue or Number:4
Record Number:CaltechAUTHORS:HOaer98
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:11560
Deposited By: Lindsay Cleary
Deposited On:08 Sep 2008 23:00
Last Modified:03 Oct 2019 00:20

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