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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 684:
Billiards and Brains: Cognitive Ability and Behavior in a p-Beauty Contest

Terence C. Burnham (), David Cesarini (), Björn Wallace (), Magnus Johannesson () and Paul Lichtenstein ()

Abstract: "Beauty contests" are well-studied, dominance-solvable games that generate two interesting results. First, most behavior does not conform to the unique Nash equilibrium. Second, there is considerable unexplained heterogeneity in behavior. In this work, we evaluate the relationship between beauty contest behavior and cognitive ability. We find that subjects with high cognitive ability exhibit behavior that is closer to the Nash equlibrium. We examine this finding through the prism of economic and biological theory.

Keywords: beauty contest; rationality; cognitive ability; Nash equlibrium; (follow links to similar papers)

JEL-Codes: C90; D01; (follow links to similar papers)

27 pages, December 10, 2007

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