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Hot versus cold behavior in centipede games

Published online by Cambridge University Press:  01 January 2025

Bernardo García-Pola ,
Nagore Iriberri  and
Jaromír Kovářík Open the ORCID record for Jaromír Kovářík [Opens in a new window]
Bernardo García-Pola*
Affiliation:
Department of Economics, AGORA Center, UNSW Business School, Sydney, NSW 2052, Australia
Nagore Iriberri*
Affiliation:
Dpto. Fundamentos del Análisis Económico I and Bridge, University of the Basque Country UPV-EHU, Av. Lehendakari Aguirre 83, 48015 Bilbao, Spain
Jaromír Kovářík*
Affiliation:
Dpto. Fundamentos del Análisis Económico I and Bridge, University of the Basque Country UPV-EHU, Av. Lehendakari Aguirre 83, 48015 Bilbao, Spain
*
bernardo.garciapola@gmail.com
nagore.iriberri@gmail.com
e-mail: jaromir.kovarik@ehu.eus
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Abstract

There is a long-standing unresolved debate in game theory and experimental economics regarding the behavioral equivalence of the direct-response method (hot play) and the strategy method (cold play). Using a unified experimental framework, we compare behavior elicited via both methods in four different Centipede Games that differ in their incentives to take or pass, in the evolution of those incentives over decision nodes, and in the asymmetry of the incentives across the two player roles. Out of the four Centipede Games, we find that both methods yield statistically different behavior in two of them, while in the remaining two we cannot reject the same behavior across the hot and cold methods. Whenever the behavior diverges, hot play consistently makes individuals stop earlier. These findings should shift the question from whether both methods are generically behaviorally equivalent to under which conditions they are (not) and why.

Keywords

Centipede gamesDirect methodStrategy methodExperiments

JEL classification

C91: Laboratory, Individual Behavior D91: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ C72: Noncooperative Games
Type
Original Paper
Information
Journal of the Economic Science Association , Volume 6 , Issue 2: Special Issue: Statistical Issues for Experimental Economists , December 2020 , pp. 226 - 238
Copyright
Copyright © Economic Science Association 2020

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Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s40881-020-00096-z) contains supplementary material, which is available to authorized users.

N. Iriberri: IKERBASQUE, Basque Foundation for Research.

J. Kovářík: CERGE-EI, a joint workplace of Charles University in Prague and the Economics Institute of the Czech Academy of Sciences, Politických vĕznů 7, 111 21 Prague, Czech Republic.

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