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Learning in experimental games

El-Gamal, Mahmoud and McKelvey, Richard D. and Palfrey, Thomas R. (1994) Learning in experimental games. Economic Theory, 4 (6). pp. 901-922. ISSN 0938-2259.

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Experimental games typically involve subjects playing the same game a number of times. In the absence of perfect rationality by all players, the subjects may use the behavior of their opponents in early rounds to learn about the extent of irrationality in the population they face. This makes the problem of finding the Bayes-Nash equilibrium of the experimental game much more complicated than finding the game-theoretic solution to the ideal game without irrationality. We propose and implement a computationally intensive algorithm for finding the equilibria of complicated games with irrationality via the minimization of an appropriate multi-variate function. We propose two hypotheses about how agents learn when playing experimental games. The first posits that they tend to learn about each opponent as they play it repeatedly, but do not learn about the population parameters through their observations of random opponents (myopic learning). The second posits that both types of learning take place (sequential learning). We introduce a computationally intensive sequential procedure to decide on the informational value of conducting additional experiments. With the help of that procedure, we decided after 12 experiments that our original model of irrationality was unsatisfactory for the purpose of discriminating between our two hypotheses. We changed our models, allowing for two different types of irrationality, reanalyzed the old data, and conducted 7 more experiments. The new model successfully discriminated between our two hypotheses about learning. After only 7 more experiments, our approximately optimal stopping rule led us to stop sampling and accept the model where both types of learning occur

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Palfrey, Thomas R.0000-0003-0769-8109
Additional Information:Copyright Springer Verlag 1994. Received February 3, 1993, revised version April 22, 1993. We acknowledge the financial support from NSF grant #SES9011828 to the California Institute of Technology. We also acknowledge the able research assistance of Mark Fey, Lynell Jackson and Jeffrey Prisbrey in setting up the experiments, recruiting subjects and running the experiments. We acknowledge the help of the Jet Propulsion Laboratory and its staff members for giving us access to their Cray XMP/18, and subsequently their Cray YMP2E/116.
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Subject Keywords:Games; Learning
Issue or Number:6
Classification Code:JEL: D83; C70
Record Number:CaltechAUTHORS:20160307-113401222
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:65123
Deposited By: Susan Vite
Deposited On:05 Apr 2016 23:47
Last Modified:22 Nov 2019 09:58

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