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The two-person beauty contest

2007; Elsevier BV; Volume: 62; Issue: 1 Linguagem: Inglês

10.1016/j.geb.2007.03.004

1090-2473

Brit Grosskopf, Rosemarie Nagel,

Game Theory and Applications

We introduce a two-person beauty contest game with a unique Nash equilibrium that is identical to the game with many players. However, iterative reasoning is unnecessary in the two-person game as choosing zero is a weakly dominant strategy. Despite this "easier" solution concept, we find that a large majority of players do not choose zero. This is the case even with a sophisticated subject pool.