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Title:Cognitive hierarchies and the centipede game PDF Logo
Authors:Bottero, Margherita
Issue Date:2010
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 723
Abstract:In the present work, I adopt the cognitive hierarchy approach to analyze the centipede game. To this end, I present and study an extensive-form version of Camerer et al.'s (2004) original normal-form model. The resulting predictions are evaluated empirically using laboratory data borrowed from a previously published experiment. The paper features two main contributions. First, it presents a parsimonious model that can, in principle, be generalized to any two-person extensive-form game of perfect information. Secondly, it demonstrates that in the centipede game the cognitive hierarchy approach leads to predictions which are not fully backwardly inductive and that can help to explain some key feature of the experimental data.
Subjects:centipede game
cognitive hierarchy
paradox backward induction
experimental data analysis
JEL:C72
C92
D03
D81
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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