690/2023 David Gill, Zachary Knepper, Victoria Prowse, Junya Zhou

We explore the influence of cognitive ability and judgment on strategic behavior in the beauty contest game. Using the level-k model of bounded rationality, cognitive ability and judgment both predict higher level strategic thinking. However, individuals with better judgment choose the Nash equilibrium action less frequently, and we uncover a novel dynamic mechanism that sheds light on this pattern. Taken together, our results indicate that fluid (i.e., analytical) intelligence is a primary driver of strategic level-k thinking, while facets of judgment that are distinct from fluid intelligence drive the lower inclination of high judgment individuals to choose the equilibrium action.

Culture, Behaviour and Development

The Social Science Research Network

https://dx.doi.org/10.2139/ssrn.4465561