Affiliation:
1. Washington University in St. Louis, Olin Business School, Campus Box 1133 Washington University, 1 Brookings Drive, St. Louis, MO 63130
2. Department of Economics, University of California at Santa Barbara, 2127 North Hall University of California Santa Barbara, CA 93106 (e-mail: ).
Abstract
In several common-value environments (e.g., auctions or elections), players should make informational inferences from opponents' strategies under certain hypothetical events (e.g., winning the auction or being pivotal). We design a voting experiment that identifies whether subjects make these inferences and distinguishes between hypothetical thinking and information extraction. Depending on feedback, between 50 and 80 percent of subjects behave nonoptimally. More importantly, these mistakes are driven by difficulty in extracting information from hypothetical, but not from actual, events. Mistakes are robust to experience and hints, and also arise in more general settings where players have no private information. (JEL C91, D71, D72, D82, D83)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
98 articles.
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