Advanced

Price competition, level-k theory and communication

Wengström, Erik LU (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:
author
publishing date
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
2009-10-20 11:03:38
date last changed
2016-10-13 04:58:55
@misc{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    = {ARRAY(0xbb91b18)},
  series       = {Economics Bulletin},
  title        = {Price competition, level-k theory and communication},
  volume       = {3},
  year         = {2008},
}