If you could read my mind
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This economic game has been used to study strategic interaction in groups for more than two decades. Here, we develop a novel design to study strategic interaction skills in children, which is based on the experimental beauty-contest game (henceforth, BCG) introduced by Nagel ( 1995, at that point called “guessing game”): N decision-makers simultaneously choose a number x between 0 and 100 and the person with the number closest to \(p*\) wins a fixed prize (mostly, \(p = 2/3\)). However, this disregards the fact that most strategic interactions outside the laboratory involve several (and often large numbers of) peers, and thus require a more comprehensive notion of strategic sophistication. Hence, most existing work on this topic has so far considered only settings, in which children interact either with a single peer child or with a computer (see the literature review below). The study of strategic interaction skills among children is inherently difficult, reflecting Jean Piaget’s view that up to a certain age, children systematically lack the ability to adopt other’s perspectives (Piaget, 1962). By contrast, children’s strategic interaction skills have been studied much less, despite being of similar importance in their own right as well as for the life cycle of skills. For this reason, the early development of preferences and skills has been studied in great detail in recent years in the economic literature (see Sutter et al., 2019, for a review). Finally, the dynamics and outcomes of weakest-link games, representing, for example, coordination problems in a firm, depend on the players’ ability to anticipate the actions of their peers (e.g., Brandts and Cooper, 2006).īut why studying these skills in children? In the last two decades, a large number of studies (summarized in Kautz et al., 2014) has documented that preferences and skills are shaped in the early years, they form the basis for future investments, and fundamentally determine adult life outcomes. ( 2014) show this in the context of a laboratory study that investigates students’ behavior in university admissions procedures. Another example are most forms of matching markets specifically, Braun et al. Footnote 1 For example, in their well-known study on signaling games, Cooper and Kagel ( 2005) argue, based on recording and coding of the dialogues of experimental participants, that “a critical step in monopolists’ learning to play strategically is putting themselves in the entrant’s shoes, reasoning from the entrant’s point of view to infer likely responses to their choice as a monopolist.” Similarly, empirical evidence demonstrates that individual investors base their investment decisions on their beliefs about the return expectations of other investors (Rangvid et al., 2013 Egan et al., 2014). There is a very wide range of situations in which these strategic interaction skills are crucial. Our new design for the experimental BCG allows to study the development of strategic interaction skills starting already in school age.Īn important skill for economic actors is the ability to anticipate the actions of others in strategic settings and to choose one’s own actions accordingly. In the implementation of our new design of the BCG with adults we find results largely in line with behavior in the classical BCG.
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Cognitive skills, measured as fluid IQ, are predictive only of whether children choose weakly dominated strategies but are neither associated with lower choices in the first round nor with successful performance in the BCG. Choices start at a slightly higher level than those of adults but learning over time and depth of reasoning are largely comparable with the results of studies run with adults. Results demonstrate that children can successfully understand and play a BCG. In addition, we collect a measure for cognitive skills to link these abilities with successful performance in the game. We develop a new design for the experimental beauty-contest game (BCG) that is suitable for children in school age and test it with 114 schoolchildren aged 9–11 years as well as with adults.