Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302685 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17168
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We explore the influence of cognitive ability and judgment on strategic behavior in the beauty contest game (where the Nash equilibrium action is zero). Using the level-k model of bounded rationality, cognitive ability and judgment both predict higher level strategic thinking. However, individuals with better judgment choose zero less frequently, and we uncover a novel dynamic mechanism that sheds light on this pattern. Taken together, our results indicate that fluid (i.e., analytical) intelligence is a primary driver of strategic level-k thinking, while facets of judgment that are distinct from fluid intelligence drive the lower inclination of high judgment individuals to choose zero.
Subjects: 
cognitive ability
judgment
fluid intelligence
matrix reasoning
beauty contest
strategic sophistication
level-k
experiment
game theory
JEL: 
C92
C72
D91
Document Type: 
Working Paper

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