Risk Averse Behavior in Asymmetric Matching Pennies Games

This paper studies several variants of 2 × 2 games with unique mixed strategy equilibria, which we call asymmetric matching pennies games. In experimental studies of behavior in these games, observed choice frequencies are typically much different from the mixed strategy Nash predictions. This paper reports experimental results for a variety of such games, and shows that a structural econometric model which incorporates risk aversion into a quantal response equilibrium explains the data very well. Moreover, risk aversion estimates are stable across the different games and are close to those obtained from laboratory and field auction data, as well as from individual lottery choice experiments. Our approach also provides a simple test of a model of inequality aversion. A nested model with risk aversion yields estimates of the inequality parameters that are insignificant.