All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC
ralph lauren polo

Erik Wengström
''Price competition, level-k theory and communication''
( 2008, Vol. 3 No.66 )
This paper analyzes communication in a price competition game using the level-$k$ theory of bounded rationality. The level-k analysis predicts prices to be higher with communication than without. Our experimental evidence lends support to the view that communication affects subjects in a way that is compatible with the level-k model, indicating that people lie in order to fool other players that they believe do less thinking. Moreover, the results indicate that the predictive power of the level-k model does crucially depend on the possibility for high level players to form homogenous beliefs about the behavior of the level-0 players.
Keywords: Noncooperative Game Theory Communication Bounded Rationality Experiments
C9 - Design of Experiments: General
Manuscript Received : Sep 23 2008 Manuscript Accepted : Oct 17 2008

  This abstract has been downloaded 1732 times                The Full PDF of this paper has been downloaded 149692 times