Anchored Strategic Reasoning

Ivanova-Stenzel, Radosveta and Seres, Gyula (25. January 2022): Anchored Strategic Reasoning. Collaborative Research Center Transregio 190, Discussion Paper No. 314

Abstract

Anchoring is a robust behavioral phenomenon modeled predominantly as a bias in individual judgment. We propose a game-theoretic model that considers players’ beliefs about others’ behavior as a mediator for the effect of the anchor on a player’s choice. The results establish that anchoring in strategic interactions reported in the literature can be rationalized by anchored beliefs about the opponents’ intentions. Notwithstanding, we also demonstrate that a player might adjust away from rather than toward the anchor in games where choices are strategic substitutes.

• Item Type: Paper
• Keywords: anchoring bias, auctions, games, incomplete information, strategy
• Faculties: Economics > Collaborative Research Center Transregio "Rationality and Competition"
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: D01, D91, C72
• Language: English