In certain markets success may depend on how well participants anticipate the behavior of other participants who have varying amounts of experience. Understanding if and how people’s behavior depends on competitors’ level of experience is important since in most markets participants have varying amounts of experience. Examining data from two new experimental studies similar to the beauty contest game first studied by Nagel (1995), the results indicate that (1) players with no experience behave the same against competitors with and without experience but (2) players quickly learn to condition their behavior on competitors’ experience level, causing (3) behavior to stop moving toward the equilibrium whenever new players enter the game and (4) experienced players to earn more money than less experienced players. The paper discusses the implications of the results for understanding and modeling behavior in markets in which participants have different amounts of experience.
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The Weatherhead School of Management at Case Western Reserve University generously provided financial support for this project. This paper benefited from discussions with Tom Bogart, David J. Cooper, Martin Dufwenberg, Jim Engle-Warnick, Ellen Garbarino, Tobias Lindqvist, Jim Rebitzer, Mari Rege, Alvin Roth, and participants at presentations at Harvard, Ohio State, Penn State and the Experimental Science Association Annual meetings, 2002. I also thank two anonymous referees for helpful comments and Jean Broughton and Stephen Leider for useful discussions in designing and running the experiments.
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Slonim, R.L. Competing Against Experienced and Inexperienced Players. Exp Econ 8, 55–75 (2005). https://doi.org/10.1007/s10683-005-0437-3
- Game Theory
- Experimental Methods