Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 671: Testing Game Theory in the Field: Swedish LUPI Lottery Games

Robert Östling (), Joseph Tao-yi Wang (), Eileen Chou () and Colin F. Camerer ()
Additional contact information
Robert Östling: Institute for International Economic Studies, Stockholm University, Postal: SE-106 91 Stockholm, Sweden
Joseph Tao-yi Wang: Department of Economics, National Taiwan University, Postal: 21 Hsu-Chow Road, Taipei 100, Taiwan
Eileen Chou: Management and Organization, Kellogg School of Management, Northwestern University, Postal: Evanston IL 60201, USA
Colin F. Camerer: Division for the Humanities and Social Sciences, California Institute of Technology, Postal: MC 228-77, Pasadena CA 91125, USA

Abstract: Game theory is usually difficult to test precisely in the field because predictions typically depend sensitively on features that are not controlled or observed. We conduct one such test using field data from the Swedish lowest unique positive integer (LUPI) game. In the LUPI game, players pick positive integers and whoever chose the lowest unique number wins a fixed prize. Theoretical equilibrium predictions are derived assuming Poisson-distributed uncertainty about the number of players, and tested using both field and laboratory data. The field and lab data show similar patterns. Despite various deviations from equilibrium, there is a surprising degree of convergence toward equilibrium. Some of the deviations from equilibrium can be rationalized by a cognitive hierarchy model.

Keywords: Population uncertainty; Poisson game; guessing game; experimental methods; behavioral game theory; level-k; cognitive hierarchy

JEL-codes: C72; C92; C93; L83

49 pages, First version: August 14, 2007. Revised: December 15, 2010. Earlier revisions: October 30, 2007, October 30, 2007, June 15, 2008, June 16, 2008, June 17, 2008, June 18, 2008, July 8, 2008, August 19, 2008, May 4, 2009, April 29, 2009, August 2, 2010, August 2, 2010, December 15, 2010.

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hastef0671.appendix.pdf PDF-file appendix

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