Sept. 2002
Abstract
The experimental treatments analysed in this paper are simple in that
there is a unique Nash equilibrium resulting in each player having a dominant
strategy. However, the data show quite clearly that subjects do not always
choose this strategy. In fact, when this dominant strategy is not a “focal”
outcome it does not even describe the average decision adequately. It is
shown that average individual decisions are best described by a decision
error model based on a censored distribution as
opposed to the truncate regression model which is typically used in
similar studies. Moreover it is shown that in the treatments where the
dominant strategy is not “focal” dynamics are important with average subject
decisions initially corresponding to the “focal” outcome and then adjusting
towards the Nash prediction. Overall, 66.7% of subjects are consistent
with Payo Maximization, 27.8% are consistent with an alternate preference
maximization and 5.6% are random.
(JEL C92, D70, D83)