Strategic reasoning in p-beauty contests

This paper analyzes strategic choice in p-beauty contests. First, I show that it is not generally a best reply to guess the expected target value, even in games with n > 2 players, and that iterated best response sequences strictly applied do not induce a choice sequence approximating pk · 0.5. Second, I argue that the beliefs and actions of players typically considered to be level 2–4 are captured more accurately using high-level concepts such as quantal response equilibrium and noisy introspection. Third, I analyze this hypothesis econometrically. The results confirm it. In five out of six data sets, the subject pool is represented most accurately as a mixture of quantal response equilibrium types and noisy introspection types. JEL–Codes: C44, C72