Kocher, Martin G. Sutter, Matthias Wakolbinger, Florian
Tinbergen Institute Discussion Paper No. 07-015/1
We study the impact of advice or observation on the depth of reasoning in an experimental beauty-contest game. Both sources of information trigger faster convergence to the equilibrium. Yet, we find that subjects who receive naïve advice outperform uninformed subjects permanently, whereas subjects who observe others’ past behavior before making their decision do only have a temporary advantage over uninformed subjects. We show in a simulation that the latter result is due to subjects failing to make the most out of observing others.
social learning advice observational learning beauty-contest game