Scandinavian Working Papers in Economics

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

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 ()
Additional contact information
Terence C. Burnham: Program for Evolutionary Dynamics, Harvard University, Postal: Harvard University, One Brattle Square, Suite 6, MA 02138, USA
David Cesarini: Department of Economics, Massachusetts Institute of Technology, Postal: Massachusetts Institute of Technology, 50 Memorial Drive, Cambridge, MA 02142, USA
Björn Wallace: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Magnus Johannesson: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Paul Lichtenstein: Department of Medical Epidemiology and Biostatistics, Karolinska Institutet, Postal: Karolinska Institutet, Box 281, SE-171 77 Stockholm, Sweden

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

JEL-codes: C90; D01

27 pages, December 10, 2007

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