Peter Moffatt (University of East Anglia), 9 Feb 2017, 4:30pm, NUBS 1.14


Speaker: Peter Moffatt, University of East Anglia

Title: Strategic Interactions with Sophisticated Agents

Date & Time: 9 February 2017 (Thursday), 4:30-5:45 pm

Venue:  Newcastle University Business School, 1.14

              5 Barrack Road, Newcastle upon Tyne, NE1 4SE



In the context of the standard guessing game, we extend level-k and cognitive hierarchy models to create a hybrid model which includes a class of "sophisticated" agents.  Sophisticated  agents are agents who believe that apart from lower-level types there are other sophisticated agents (using the same cognitive process as themselves) in the population and best-repond to this belief.  A free parameter in the model is psb, representing a sophisticated agent’s belief about the proportion of other sophisticated agents in the population.   Our hybrid model nests the standard level-k and cognitive hierachy models (when psb=0) as well as the Nash equilibrium prediction (when psb=1) as special cases.  Furthermore, if a sophisticated agent’s psb belief happens to coincide with the actual proportion of sophisticated agents in the population, ps, we may classify this  agent as “clairvoyant sophisticated”, since in this situation their best response is the winning response.  The hybrid model captures observed behaviour more accurately than any of the nested models.  Econometric estimation reveals that around 24% of the population are sophisticated, but that these sophisticated agents tend to over-estimate the proportion of the population who are of similar mind.  This is interpreted as a manifestation of the Dunning-Kruger effect.   


Last modified: Mon, 06 Feb 2017 16:56:56 GMT