Inexact Information, Strategic Sophistication and Equilibrium Transition : A Quasi-Continuous-Time Experiment

This paper provides an experimental investigation of the evolutionary game models which predict transitions among strict Nash equilibria under inexact (inaccurate but unbiased) information of opponents' behaviors. We design a quasi-continuous-time experiment in which a group of subjects play a coordination game recurrently under either more or less accurate information. We observe that more accurate information facilitates efficiency-improving transitions among strict Nash equilibria than less accurate information, which is in contrast with the evolutionary theory but supports the models of strategic teaching. More accurate information about opponents' behaviors induces more subjects engaging in persistent strategic deviations from inefficient Nash equilibria that can induce more subjects to deviate in the future, resulting in efficiencyimproving equilibrium transitions. When information is less accurate, subjects' choices are less responsive to changes in the information received. The slow response to the information either blocks or delays efficiency-improving equilibrium transitions