Analysing sequential game equilibrium
Subject
Finance
Publishing details
IFA Working Paper
Publication Year
1997
Abstract
The Wheel is a sequential game of perfect information played twice during each taping of the television game show The Price Is Right. This game has simple rules, and the stakes involved are high. We derive a Unique Subgame Perfect Nash Equilibrium (USPNE) for The Wheel and test its predictive ability using data from a sample of actual plays from the show. Although contestants deviate from the subgame perfect strategies on a significant number of occasions, USPNE is a good predictor of the contestants' winning frequencies. We then use the concept of Quantal Response Equilibrium (QRE) to explain contestant deviations from USPNE. We find that contestants are less likely to use their subgame perfect strategies when the cost of deviating from these strategies is relatively low. Other strategic issues, like the relative difficulties of the different contestants' decisions, are also addressed within the QRE framework
Publication Research Centre
Institute of Finance and Accounting
Series Number
FIN 252
Series
IFA Working Paper
Available on ECCH
No
