A Note on Disbelief in Others regarding Backward Induction

Abstract

We present experimental results on the role of beliefs in the cognitive ability of others in a problem involving backward induction. Using a modified version of the so-called race game, our design allows the effects of a player’s own inability to perform backward induction to be separated from the effects of her disbelief in the ability of others to do so. We find that behavior is responsive to the dependence on others who might fail in backward induction as well as information regarding their backward induction skills.

Keywords

• backward induction
• iterative thinking
• beliefs