Skip to main content Accessibility help
×
Home
Hostname: page-component-cf9d5c678-5tm97 Total loading time: 0.188 Render date: 2021-07-29T06:04:42.003Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "metricsAbstractViews": false, "figures": true, "newCiteModal": false, "newCitedByModal": true, "newEcommerce": true, "newUsageEvents": true }

Article contents

Bounded Rationality in the Centipede Game1

Published online by Cambridge University Press:  03 January 2012

Abstract

Normative game theory unsatisfactorily explains rational behavior. Real people do not behave as predicted, and what is prescribed as rational behavior is normally unattainable in real-life. The problem is that current normative analysis does not account for people's cognitive limitations – their bounded rationality. However, this paper develops an account of bounded rationality that explains the rationality of more realistic behavior. I focus on the Centipede Game, in which boundedly rational players explore and test others' immediate behavior, until they can apply limited backward induction. The result is that the game has a solution in the form of a subjective Nash equilibrium, which boundedly rational players can possibly realize.

Type
Research Article
Information
Episteme , Volume 8 , Issue 3 , October 2011 , pp. 262 - 280
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bicchieri, C. 1992. “Knowledge-Dependent Games: Backward Induction.” In Bicchieri, C. and Chiara, M.L.D. (eds.), Knowledge, Belief, and Strategic Interaction, pp. 327–43 Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Bicchieri, C. 1993. Rationality and Coordination. Cambridge: Cambridge University Press.Google Scholar
Bicchieri, C. 2006. The Grammar of Society: The Nature and Dynamics of Social Norms. New York: Cambridge University Press.Google Scholar
Bicchieri, C. and Antonelli, G. A.. 1995. “Game-Theoretic Axioms for Local Rationality and Bounded Knowledge.” Journal of Logic, Language, and Information 4: 145–67CrossRefGoogle Scholar
Camerer, C. F. 2003. Behavioral Game Theory: Experiments in Strategic Interaction. Princeton: Princeton University Press.Google Scholar
Costa-Gomes, M., Crawford, V., and Broseta, B.. 2001. “Cognition and Behavior in Normal-Form Games: An Experimental Study.” Econometrica 69: 1193–235.CrossRefGoogle Scholar
Costa-Gomes, M. and Crawford, V.. 2006. “Cognition and Behavior in Two-Person Guessing Games: An Experimental Study.” American Economic Review 96(5): 1737–68.CrossRefGoogle Scholar
Crawford, V. and Iriberri, N.. 2007a. “Fatal Attraction: Salience, Naïveté, and Sophistication in Experimental ‘Hide-and-Seek’ Games.” American Economic Review 97(5): 1731–50CrossRefGoogle Scholar
Crawford, V. and Iriberri, N.. 2007b. “Level-k Auctions: Can a Nonequilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions?Econometrica 75: 1721–70.CrossRefGoogle Scholar
Gigerenzer, G. 2001. “The Adaptive Toolbox.” In Gigerenzer, G. and Selten, R. (eds.), Bounded Rationality: The Adaptive Toolbox, pp. 3750Cambridge, MA: The MIT Press.Google Scholar
Hedden, T. and Zhang, J.. 2002. “What Do You Think I Think You Think? Strategic Reasoning in Matrix Games.” Cognition 85: 136CrossRefGoogle ScholarPubMed
Ho, T., Camerer, C. F., and Weigelt, K.. 1998. “Iterated Dominance and Iterated Best Response in Experimental ‘p-Beauty Contests.’The American Economic Review 88(4): 947–69.Google Scholar
Johnson, E. J., Camerer, C.Sen, S., and Rymon, T.. 2002. “Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining.” Journal of Economic Theory 104: 1647.CrossRefGoogle Scholar
Lewis, D. 1969/2002. Convention: A Philosophical Study. Oxford: Blackwell Publishers.Google Scholar
McKelvey, R. D. and Palfrey, T. R.. 1992. “An Experimental Study of the Centipede Game.” Econometrica 60: 803–36.CrossRefGoogle Scholar
Meijering, B., Van Maanen, L., Van Rijn, H., and Verbrugge, R.. 2010. “The Facilitative Effect of Context on Second-Order Social Reasoning.” In Catrambone, R. and Ohlsson, S. (eds.), Proceedings of the 32nd Annual Meeting of the Cognitive Science Society, pp. 1423–8. Austin, TX: Cognitive Science Society.Google Scholar
Nagel, R. 1995. “Unraveling in Guessing Games: An Experimental Study.” American Economic Review 85(5): 1313–26.Google Scholar
Selten, R. 2001. “What is Bounded Rationality?” In Gigerenzer, G. and Selten, R. (eds.), Bounded Rationality: The Adaptive Toolbox, pp. 1336Cambridge, MA: The MIT Press.Google Scholar
Smead, R. 2008. “The Evolution of Cooperation in the Centipede Game with Finite Populations.” Philosophy of Science 75: 157–77.CrossRefGoogle Scholar
Stahl, D. O. 1996. “Boundedly Rational Rule Learning in a Guessing Game.” Games and Economic Behavior 16: 303–30.CrossRefGoogle Scholar
Stahl, D. O. and Wilson, P. W.. 1995. “On Players' Models of Other Players: Theory and Experimental Evidence.” Games and Economic Behavior 10: 218–54.CrossRefGoogle Scholar
Weirich, P. 2010. Collective Rationality: Equilibrium in Cooperative Games. Oxford: Oxford University Press.CrossRefGoogle Scholar
3
Cited by

Send article to Kindle

To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Bounded Rationality in the Centipede Game1
Available formats
×

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

Bounded Rationality in the Centipede Game1
Available formats
×

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

Bounded Rationality in the Centipede Game1
Available formats
×
×

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *