Cognitive ability and strategic sophistication

In three experiments we examine the extent to which strategic sophistication (i.e., inductive reasoning, iterative dominance and level-k thinking) is determined by broader cognitive skills. In the first experiment we replicate previous results showing strong associations between cognitive ability and sophistication in a game of iterative dominance. We then extend the results to a game requiring induction to win. In the second two experiments we extend the literature in new directions. In Experiment 2 we modify the games to better capture participants’ ability to reason inductively and predict the sophistication of others and, again, find strong associations between cognitive ability, measured using a common IQ test, and sophistication. In Experiment 3 we examine more closely the causal nature of the relationship between cognitive ability and sophistication. We use a standard tool from cognitive psychology to randomly lower the cognitive ability of participants and show that this significantly affects game performance. JEL Codes: C72, C92, D03, D83