Rationalizing Irrational Beliefs

In this paper, we re-examine various previous experimental studies of the Centipede Game in the literature. These experiments found that players rarely follow the subgame-perfect equilibrium strategies of the game, and various modifications to the game were proposed to explain the outcomes of the experiments. We here offer yet another modification. Players have a choice of whether or not to believe that their opponents use subgame-perfect equilibrium strategies. We define a ‘behavioral equilibrium’ for this game. This equilibrium concept can reproduce the outcomes of those experiments.


Issue Date:
2006-02
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/273503
Language:
English
Total Pages:
12
JEL Codes:
C72; C91
Series Statement:
Working Paper No. 1033




 Record created 2018-06-11, last modified 2020-10-28

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