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An Experimental Study of the Centipede Game

McKelvey, Richard D. and Palfrey, Thomas R. (1992) An Experimental Study of the Centipede Game. Econometrica, 60 (4). pp. 803-836. ISSN 0012-9682.

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We report on an experiment in which individuals play a version of the centipede game. In this game, two players alternately get a chance to take the larger portion of a continually escalating pile of money. As soon as one person takes, the game ends with that player getting the larger portion of the pile, and the other player getting the smaller portion. If one views the experiment as a complete information game, all standard game theoretic equilibrium concepts predict the first mover should take the large pile on the first round. The experimental results show that this does not occur. An alternative explanation for the data can be given if we reconsider the game as a game of incomplete information in which there is some uncertainty over the payoff functions of the players. In particular, if the subjects believe there is some small likelihood that the opponent is an altruist, then in the equilibrium of this incomplete information game, players adopt mixed strategies in the early rounds of the experiment, with the probability of taking increasing as the pile gets larger. We investigate how well a version of this model explains the data observed in the centipede experiments.

Item Type:Article
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Palfrey, Thomas R.0000-0003-0769-8109
Additional Information:© 1992 The Econometric Society. Manuscript received May, 1990; final revision received February, 1992. 1Support for this research was provided in part by NSF Grants #IST-8513679 and #SES-878650 to the California Institute of Technology. We thank Mahmoud El-Gamal for valuable discussions concerning the econometric estimation, and we thank Richard Boylan, Mark Fey, Arthur Lupia, and David Schmidt for able research assistance. We thank the JPL-Caltech joint computing project for granting us time on the CRAY X-MP at the Jet Propulsion Laboratory. We also are grateful for comments and suggestions from many seminar participants, from an editor, and from two very thorough referees.
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Subject Keywords:Game theory, experiments, rationality, altruism
Issue or Number:4
Record Number:CaltechAUTHORS:20160307-145049106
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Official Citation:McKelvey, Richard D., and Thomas R. Palfrey. 1992. “An Experimental Study of the Centipede Game”. Econometrica 60 (4). [Wiley, Econometric Society]: 803–36. doi:10.2307/2951567.
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:65145
Deposited On:01 Apr 2016 00:23
Last Modified:22 Nov 2019 09:58

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