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Strategic sophistication of individuals and teams. Experimental evidence
Matthias Sutter1, Simon Czermak2, Francesco Feri3
1Department of Public Finance, University of Innsbruck, Universitaetsstrasse 15, A-6020 Innsbruck, Austria ; University of Cologne, Germany.
Abstract:
Many important decisions require strategic sophistication. We examine experimentally whether teams act more strategically than individuals. We let individuals and teams make choices in simple games, and also elicit first- and second-order beliefs. We find that teams play the Nash equilibrium strategy significantly more often, and their choices are more often a best response to stated first order beliefs. Distributional preferences make equilibrium play less likely. Using a mixture model, the estimated probability to play strategically is 62% for teams, but only 40% for individuals. A model of noisy introspection reveals that teams differ from individuals in higher order beliefs.
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