Representation Effects in the Centipede Game
PLOSone
We run different modified centipee games to test the predictions of limited backward induction – the idea that subjects find it harder to backward induct depending on the difficulty of parsing payoff information. Indeed the harder it is to parse payoffs, the more subjects “cooperate” by moving further in the centipede.
game theory
choice process
Abstract
We explore the effects on strategic behavior of alternative representations of a centipede game that differ in terms of complexity. In a laboratory experiment, we manipulate the way in which payoffs are presented to subjects in two different ways. In both cases, information is made less accessible relative to the standard representation of the game. Results show that these manipulations shift the distribution of take nodes further away from the equilibrium prediction. The evidence is consistent with the view that failures of game-form recognition and the resulting limits to strategic reasoning are crucial for explaining non-equilibrium behavior in the centipede game.