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A generalized cognitive hierarchy model of games

Chong, Juin-Kuan and Ho, Teck-Hua and Camerer, Colin (2016) A generalized cognitive hierarchy model of games. Games and Economic Behavior, 99 . pp. 257-274. ISSN 0899-8256. doi:10.1016/j.geb.2016.08.007. https://resolver.caltech.edu/CaltechAUTHORS:20161117-072921543

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Abstract

Subjects in simple games frequently exhibit non-equilibrium behaviors. Cognitive hierarchy (CH) and level k (LK) are two prevailing structural models that capture such behaviors well. This paper proposes a generalized CH (GCH) model that nests a variant of the LK model, called LM. GCH differs from CH in two ways. First, each lower level's actual frequency is exponentially weighted with α to form level-k's belief on relative proportions; α captures stereotype bias. CH assumes no stereotype bias (α=1) and LM assumes extreme bias (α=∞). Second, GCH replaces random choice with minimum aversion for level 0. Level 0s are more likely to choose strategies that never yield the minimum payoff for any of the opponent's strategies. GCH captures behaviors better than CH and LK in fifty-five n×m games from four datasets. Robustness tests using three new games further validate GCHs descriptive strength over CH and LK.


Item Type:Article
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.1016/j.geb.2016.08.007DOIArticle
http://www.sciencedirect.com/science/article/pii/S0899825616300847PublisherArticle
ORCID:
AuthorORCID
Chong, Juin-Kuan0000-0002-5187-8652
Ho, Teck-Hua0000-0001-5210-4977
Camerer, Colin0000-0003-4049-1871
Additional Information:© 2016 Elsevier Inc. Received 4 June 2014; Available online 5 September 2016. 1We thank Vince Crawford, the associate editor and three anonymous reviewers. Their constructive comments and suggestions substantially improved the paper. We thank Sadat Reza, Rehan Ali, Zhang Xing and Wu Hang for their research assistance.
Subject Keywords:Cognitive hierarchy; Level-k model; Level-m model; Generalized cognitive hierarchy; Non-equilibrium structural models; Behavioral game theory
Classification Code:JEL: C72; C91; D03; D83
DOI:10.1016/j.geb.2016.08.007
Record Number:CaltechAUTHORS:20161117-072921543
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20161117-072921543
Official Citation:Juin-Kuan Chong, Teck-Hua Ho, Colin Camerer, A generalized cognitive hierarchy model of games, Games and Economic Behavior, Volume 99, September 2016, Pages 257-274, ISSN 0899-8256, http://dx.doi.org/10.1016/j.geb.2016.08.007. (http://www.sciencedirect.com/science/article/pii/S0899825616300847)
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:72087
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:17 Nov 2016 20:08
Last Modified:11 Nov 2021 04:55

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