Competing Against Experienced and Inexperienced Players

Abstract

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.

This is a preview of subscription content, log in to check access.

References

  1. Andreoni, J. (1988). “Why Free Ride? Strategies and Learning in Public Goods Experiments.” Journal of Public Economics. 37, 291–304.

    Article  Google Scholar 

  2. Andreoni, J. and Miller, J. (1993). “Rational Cooperation in the Finitely Repeated Prisoner’s Dilemma Game: Experimental Evidence.” Economic Inquiry. 103, 570–585.

    Google Scholar 

  3. Bosch-Domenech, A.J., Garcia-Montalvo, R.N., and Sattora, A. (2002). “One, Two (Three) Infinity, #x0130; : Newspaper and Lab Beauty-Contest Experiments.” American Economic Review. 92, 1687–1701.

    Article  Google Scholar 

  4. Budescu, D.I. Erev, Wallsten, I., and Yates, T. (Eds.) (1997). “Stochastic and Cognitive Models of Confidence,” Journal of Behavioral Decision Making, 10.

  5. Camerer, C. (1997). “Progress in Behavioral Game Theory.” Journal of Economic Perspectives. 11, 167–188.

    Google Scholar 

  6. Camerer, C. and Ho, T. (1998). “EWA Learning in Normal-Form Games: Probability Rules, Heterogeneity and Time Variation.” Journal of Mathematical Psychology. 42, 305–326.

    Article  PubMed  Google Scholar 

  7. Camerer, C. and Ho, T. (1999). “Experience Weighted Attractions in Games.” Econometrica. 67, 827–874.

    Article  Google Scholar 

  8. Camerer, C., Ho, T., and Chong, J. (2002a). “Sophisticated EWA Learning and Strategic Teaching in Repeated Games.” Journal of Economic Theory. 104, 137–188.

    Article  Google Scholar 

  9. Camerer, C., Ho, T., and Chong, J. (2002b). “Behavioral Game Theory: Thinking, Learning and Teaching.” Working paper, California Institute of Technology.

  10. Cooper, D., Feltovich, N., Roth, A., and Zwick, R. (2002). “Relative Versus Absolute Speed of Adjustment in Strategic Environments.” Experimental Economics. 6(2), 181–207, forthcoming.

    Article  Google Scholar 

  11. Cooper, D. and Kagel, J. (2002). “Lessons Learned: Generalized Learning Across Games.” American Economic Review. 92(2), 202–207.

    Google Scholar 

  12. Croson, R. (1996). “Partners and Strangers Revisited.” Economic Letters. 53, 25–32.

    Article  Google Scholar 

  13. Duffy, J. and Nagel, R. (1997). “On the Robustness of Behavior in Experimental Beauty Contest Games.” Economic Journal. 107, 1684–1700.

    Article  Google Scholar 

  14. Dufwenberg, M., Lindqvist, T., and Moore, E. (2003). “Bubbles and Experience: An Experiment on Speculation.” Working Paper, University of Arizona.

    Google Scholar 

  15. Erev, I. and Roth, A. (1998). “Predicting How People Play Games: Reinforcement Learning in Experimental Games with Unique Mixed-Strategy Equilibria.” American Economic Review. 88, 848–881.

    Google Scholar 

  16. Grosskopf, B. and Nagel, R. (2002). “Rational Reasoning or Adaptive Behavior? Evidence from Two-Person Beauty Contest Games.” Harvard NOM Research Paper No. 01–09.

  17. Haslam, S., Oakes, P., Turner, J., and McGarty, C. (1996). “Social Identity, Self-Categorization, and the Perceived Homogeneity of In-Groups and Out-Groups. The Interaction between Motivation and Cognition.” In Handbook of Motivation and Cognition (vol. 3), R. Sorrentino and E. Higgins (eds.), New York: Guilford, pp. 188–222.

  18. Harvey, N. (1997). “Confidence in Judgment.” Trends in Cognitive Science. 1, 78–82.

    Article  Google Scholar 

  19. Ho, T., Camerer, C., and Weigelt, K. (1998). “Iterated Dominance in Iterated Best-Best Response in Experimental P-Beauty Contest Games.” American Economic Review. 88, 947–969.

    Google Scholar 

  20. Johnson, E.C. Camerer, Sen, S., and Rymon, T. (2002). “Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining.” Journal of Economic Theory. 104, 16–47.

    Article  Google Scholar 

  21. Kagel, J. and Levin, D. (1986). “The Winner’s Curse and Public Information in Common Value Auctions.” American Economic Review. 76, 894–920.

    Google Scholar 

  22. Kagel, J. and Levin, D. (1999). “Common Value Auctions with Insider Information.” Econometrica. 67, 1219–1238.

    Article  Google Scholar 

  23. Kagel, J., Levin, D., and Dyer, D. (1989). “A Comparison of Naive and Experienced Bidders in Common Value Auctions: A Laboratory Analysis.” Economic Journal. 99, 108–115.

    Google Scholar 

  24. Lichtenstein, S., Fischhoff, B., and Phillips, L. (1982). “Calibration of Probabilities: The State of the Art in 1980.” In Judgment Under Uncertainty: Heuristics and Biases, D. Kahneman, P. Slovic and A. Tversky (eds.), New York: Cambridge University Press, pp. 335–351.

    Google Scholar 

  25. Nagel, R. (1995). “Unraveling in Guessing Games: An Experimental Study.” American Economic Review. 85, 1313–1326.

    Google Scholar 

  26. Nagel, R. (1999). “A Survey on Experimental Beauty Contest Games; Bounded Rationality and Learning.” In Games and Human Behavior, D. Budescu, I. Erev and R. Zwick (eds.), Lawrence Erlbaum Associates, pp. 105–142.

  27. Ockenfels, A. and Roth, A. (2002). “Late and Multiple Bidding in Second Price Internet Auctions: Theory and Evidence Concerning Different Rules for Ending an Auction.” Games and Economic Behavior (forthcoming).

  28. Osborne, M. and Rubinstein, A. (1994). A Course in Game Theory. Cambridge, MA: MIT Press.

    Google Scholar 

  29. Schotter, A. and Sopher, B. (2003). “Social Learning and Convention Creation in Inter-Generational Games: An Experimental Study.” Journal of Political Economy. 111.

  30. Selten R. and Stoecker, R. (1986). “End Behavior in Sequences of Finite Prisoner’s Dilemma Supergames.” Journal of Economic Behavior and Organization. 65, 47–70.

    Article  Google Scholar 

  31. Stahl, D. (1996). “Rule Learning in a Guessing Game.” Games and Economic Behavior. 16, 303–330.

    Article  Google Scholar 

  32. Stahl, D. (2000). “Rule Learning in Symmetric Normal-Form Games: Theory and Evidence.” Games and Economic Behavior. 32, 105–138.

    Article  Google Scholar 

  33. Stahl, D. and Wilson, P. (1995). “On Players Models of Other Players.” Games and Economic Behavior. 10, 213–254.

    Article  Google Scholar 

  34. Weber, R. (2003). “Learning With No Feedback in a Competitive Guessing Game.” Games and Economic Behavior. 44, 134–144.

    Article  Google Scholar 

Download references

Acknowledgment

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.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Robert L. Slonim.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Slonim, R.L. Competing Against Experienced and Inexperienced Players. Exp Econ 8, 55–75 (2005). https://doi.org/10.1007/s10683-005-0437-3

Download citation

Keywords

  • Game Theory
  • Learning
  • Experimental Methods