NO.1101

Man versus Nash An experiment on the self-enforcing nature of mixed strategy equilibrium

Jason Shachat, J. Todd Swarthout, and Lijia Wei

Abstract
We examine experimentally how humans behave when they play against a computer which implements its part of a mixed strategy Nash equilibrium. We consider two games, one zero-sum and another unprofitable with a pure minimax strategy. A minority of subjects’ play was consistent with their Nash equilibrium strategy, while a larger percentage of subjects’ play was more consistent with different models of play: equiprobable play for the zero-sum game, and the minimax strategy in the unprofitable game. We estimate the heterogeneity and dynamics of the subjects’ latent mixed strategy sequences via a hidden Markov model. This provides clear results on the identification of the use of pure and mixed strategies and the limiting distribution over strategies. The mixed strategy Nash equilibrium is not self-enforcing except when it coincides with the equal probability mixed strategy, and there is surprising amounts of pure strategy play and clear cycling between the pure strategy states.

Creation Date
2011/2/21

Revision Date
2011/2/21

Classification-JEL
C92, C72, C10

Keywords
Mixed Strategy, Nash Equilibrium, Experiment, Hidden Markov Model

File Attachments
Full Text (2011)