Teaching Nash Equilibrium and Strategy DominanceA Classroom Experiment on the Beauty Contest

  1. Brañas-Garza, Pablo
  2. Alba Fernández, María Virtudes
  3. Jiménez Jiménez, Francisca
  4. Rodero-Cosano, Javier
Journal:
Documentos de trabajo ( Instituto de Estudios Sociales Avanzados de Andalucía )

Year of publication: 2004

Issue: 13

Type: Working paper

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Abstract

The aim of this investigation is to show how the use of classroom experiments may be a good pedagogical tool to teach the Nash equilibrium (NE) concept. For our purposes, the basic game is a repeated version of the Beauty Contest Game (BCG), a simple guessing game in which repetition lets students react to other players' choices and converge iteratively to the equilibrium solution. We perform this experiment with undergraduate students with no previous training in game theory. After four rounds, we observe a clear decreasing tendency in the average submitted number in all groups. Thus, our findings prove that by playing a repeated BCG, students quickly learn how to reach the NE solution.