Cognitive Load and Strategic Sophistication

Allred, Sarah and Duffy, Sean and Smith, John (2013): Cognitive Load and Strategic Sophistication.

Abstract

We study the relationship between the cognitive load manipulation and strategic sophistication. The cognitive load manipulation is designed to reduce the subject's cognitive resources which are available for deliberation on a choice. In our experiment, subjects are placed under a large cognitive load (given a difficult number to remember) or a low cognitive load (given a number which is not difficult to remember). Subsequently, the subjects play a one-shot game then they are asked to recall the number. This procedure is repeated for various games, where a new number is given for each game. We find a nuanced and nonmonotonic relationship between cognitive load and strategic sophistication. This relationship is consistent with two effects. First, subjects under a high cognitive load tend to exhibit behavior consistent with the reduced ability to compute the optimal decision. Second, the cognitive load tends to affect the subject's perception of their relative standing in the distribution of cognitive ability. The net result of these two effects depends on the strategic setting. Our experiment provides indirect evidence on the literature which examines the relationship between measures of cognitive ability and strategic sophistication.

• Item Type: MPRA Paper
• Language: English
• Keywords: bounded rationality; experimental economics; working memory load; beauty contest; strategic sophistication; rational inattention
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior

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