published in Quarterly Journal of Economics, 508-536, 1997

Full Text

Measuring Players' Losses in Experimental Games

Drew Fudenberg and David K. Levine

April 8, 1995

Revised: December 7, 1996

Abstract: In some experiments rational players who understand the structure of the game could improve their payoff. We bound the size of the observed losses in several such experiments. To do this, we suppose that observed play resembles an equilibrium because players learn about their opponents’ play. Consequently, in an extensive form game, some actions that are not optimal given the true distribution of opponents’ play could be optimal given available information. We find that average losses are small: $0.03 to $0.64 per player with stakes between $2 and $30. In one of the three experiments we examine this also implies a narrow range of outcome.