Working Paper: CEPR ID: DP7529
Authors: Isabelle Brocas; Juan D. Carrillo; Stephanie W. Wang; Colin Camerer
Abstract: In experiments, people do not always appear to think very strategically or to infer the information of others from their choices. To understand this thinking process further, we use "Mousetracking" to record which game payoffs subjects look at, for how long, in games of private information with three information states, which vary in strategic complexity. Subjects often deviate from Nash equilibrium choices, converge only modestly toward equilibrium across 40 trials, and often fail to look at payoffs which they need to in order to compute an equilibrium response. Theories such as QRE and cursed equilibrium, which can explain non-equilibrium choices, are not well supported by the combination of both choices and lookups. When cluster analysis is used to group subjects according to lookup patterns and choices, the clusters appear to correspond approximately to level-3, level-2 and level-1 thinking in level-k cognitive hierarchy models. The connection between looking and choices is strong enough that the time durations of looking at key payoffs can predict choices, to some extent, at the individual level and at the trial-by-trial level.
Keywords: Asymmetric Information; Attention; Laboratory Experiment; Mouse Tracking
JEL Codes: C92; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| subjects who look at the necessary payoffs (J33) | more likely to play Nash (C72) |
| longer lookups at key payoffs (C78) | higher likelihoods of Nash play (C72) |
| increased attention to key payoffs (D91) | higher probability of making Nash choices (C72) |
| cognitive limitations and strategic naivete (D91) | non-equilibrium outcomes (D59) |