Identifying Higher-Order Rationality

Strategic choice data from a carefully chosen set of ring-network games are used to obtain individual-level estimates of higher-order rationality. The experimental design exploits a natural exclusion restriction that is considerably weaker than the assumptions underlying alternative designs in the literature. In our data set, 93 percent of subjects are rational, 71 percent are rational and believe others are rational, 44 percent are rational and hold second-order beliefs that others are rational, and 22 percent are rational and hold at least third-order beliefs that others are rational.