Consider the "beauty contest" or guessing game experiment., Ask an Expert

Economics

Consider the "Beauty Contest" or guessing game experiment. Everybody picks an integer between 0 and 100 inclusive, and the winner is the person who picks closest to 2/3 of the average pick.

a) What picks are ruled out by the idea of one level of iterated dominance, and why?

b) What is the equilibrium pick? Why?

c) What pick would a level one reasoner make? Level two?

d) Discuss how to find the optimal pick.

e) Suppose we change the rules so that you pick a number between 100 and 200, and the winner is the person who picks closest to 3/2 of the average pick.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9695392

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