ON PLAYERS MODELS OF OTHER PLAYERS - THEORY AND EXPERIMENTAL-EVIDENCE

We develop and test a theory of human behavior in 3 x 3 symmetric games. The theory hypothesizes a family of five boundedly rational archetypes distinguished by their model of other players and their ability to identify optimal choices given their priors. We designed and conducted an experiment to detect these archetypes as well as a rational expectations type and to estimate parameters which define these types. The experimental evidence rejects the rational expectations type but confirms the boundedly rational theory. We consider this a stepping stone toward a descriptive and prescriptive theory of games. (C) 1995 Academic Press, Inc.