Individual and group decisions in the centipede game: Are groups more “rational” players?

Abstract

Two experiments compared the Centipede game played either by 2 individuals or by 2 (3-person) groups. The 2 competitors alternate in deciding whether to take the larger portion of an increasing (or constant) pile of money, and as soon as one ''takes'' the game ends. Assuming that both sides are concerned only with maximizing their own payoffs (and that this is common knowledge), the game theoretic solution, derived by backward induction, is for the first mover to exit the game at the first decision node. Both experiments found that although neither individuals nor groups fully complied with this solution, groups did exit the game significantly earlier than individuals. The study of experimental games has uncovered many instances in which individuals deviate systematically from the game theoretic solution. This study is in accord with other recent experiments in suggesting that game theory may provide a better description of group behavior.

Are groups more rational than individuals? A review of interactive decision making in groups

“…Kugler and Ziegelmeyer 112 showed that groups stopped the game significantly earlier than individuals do. Once again, this means that group behavior is closer to the game-theoretic prediction.…”

Level-K Analysis of Experimental Centipede Games

“…12 In a related strand, Bornstein et al (2004) compare individual and group behavior in the Palacios-Huerta and Volij (2008) report field and laboratory experiments with chess masters. They chose chess masters as their subjects, because they expected that chess masters are familiar with backward induction reasoning through their training and competition.…”

Gender differences in honesty: Groups versus individuals

“…In fact, there is growing evidence from contexts other than lying that groups often decide markedly different than individuals (for surveys, see Charness and Sutter, 2012;Kugler et al, 2012). On the one hand, groups are better at solving cognitive tasks and act more selfishly (see e.g., Maciejovsky et al, 2013;Bornstein et al, 2004;Falk and Szech, 2013). That suggests that groups might be more willing to realize the potential monetary gains from lying.…”