Cognitive Imprecision and Strategic Behavior

We propose and experimentally test a theory of strategic behavior in which players are cognitively imprecise perceive fundamental parameter with noise. focus on 2 x coordination games, generate multiple equilibria when perception is precise. When adding small amount cognitive imprecision to the model, we obtain unique equilibrium where use simple cutoff strategy. The model further predicts that context-dependent: implement strategy noise, noise decreases volatility. Our experimental data strongly support this novel prediction reject several alternative game-theoretic models do not predict context-dependence. also find subjects aware other players' imprecision, key generating uncertainty. framework has important implications for literature global games and, more broadly, illuminates role both random context-dependent games.