Price competition, level-k theory and communication
(2008) In Economics Bulletin 3(66). p.1-15- Abstract
- This paper analyzes communication in a price competition game using the level-$k$ theory of bounded rationality. The level-k analysis predicts prices to be higher with communication than without. Our experimental evidence lends support to the view that communication affects subjects in a way that is compatible with the level-k model, indicating that people lie in order to fool other players that they believe do less thinking. Moreover, the results indicate that the predictive power of the level-k model does crucially depend on the possibility for high level players to form homogenous beliefs about the behavior of the level-0 players
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/1482653
- author
- Wengström, Erik LU
- publishing date
- 2008
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Economics Bulletin
- volume
- 3
- issue
- 66
- pages
- 1 - 15
- publisher
- Economics Bulletin
- external identifiers
-
- scopus:55449126351
- ISSN
- 1545-2921
- language
- English
- LU publication?
- no
- id
- f0692f51-b167-4d1f-a43b-41a9c853dfd5 (old id 1482653)
- date added to LUP
- 2016-04-04 13:58:09
- date last changed
- 2022-01-30 01:12:43
@article{f0692f51-b167-4d1f-a43b-41a9c853dfd5, abstract = {{This paper analyzes communication in a price competition game using the level-$k$ theory of bounded rationality. The level-k analysis predicts prices to be higher with communication than without. Our experimental evidence lends support to the view that communication affects subjects in a way that is compatible with the level-k model, indicating that people lie in order to fool other players that they believe do less thinking. Moreover, the results indicate that the predictive power of the level-k model does crucially depend on the possibility for high level players to form homogenous beliefs about the behavior of the level-0 players}}, author = {{Wengström, Erik}}, issn = {{1545-2921}}, language = {{eng}}, number = {{66}}, pages = {{1--15}}, publisher = {{Economics Bulletin}}, series = {{Economics Bulletin}}, title = {{Price competition, level-k theory and communication}}, url = {{https://lup.lub.lu.se/search/files/6248776/1494610.pdf}}, volume = {{3}}, year = {{2008}}, }