Dresden 2003 – scientific programme

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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 3: Postersitzung

AKSOE 3.18: Poster

Monday, March 24, 2003, 15:45–17:15, P1

The relation between the exactness of numerical decision processing and the selected numbers in the guessing game — •Stefan Reimann¹, Bodo Vogt², and Enrico de Giorgi¹ — ¹Institut fuer Empirische Wirtschaftsforschung, Universitaet Zuerich, Bluemlisalpstr. 10, CH-8006 Zuerich — ²Institut fuer Mathematische Wirtschaftsforschung, Universitaet Bielefeld, Postfach 100131, 33501 Bielefeld

The guessing game or beauty contest was proposed by Keynes as an example for boundedly rational decision processing in financial markets. While entirely rational strageties predict 0 as the unique stable (Nash) equilibrium, the winning number observed in several experiments is strictly greater than 0. Using the basic idea is that numbers are regarded as representatives of intervals, we show analytically that under boundedly rational conditions the resulting winning number is in fact strictly greater than zero, even if persons use infinitely many iterations of guessing. It is suggested that the level of guessing is bounded by the exactness of the numerical decision processing and vice versa.