Choices in the 11-20 game: the role of risk aversion (Q1630472)

Summary: \textit{A. Arad} and \textit{A. Rubinstein} [``The 11-20 money request game: a level-k reasoning study'', Am. Econ. Rev. 102, No. 7, 3561--3573 (2012; \url{doi:10.1257/aer.102.7.3561})] proposed the 11-20 money request game as an alternative to the P beauty contest game for measuring the depth of thinking. In this paper, we show theoretically that in the Nash equilibrium of the 11-20 game players are more likely to choose high numbers if they are risk-averse rather than risk neutral. Hence, the depth of thinking measured in the 11-20 game is biased by risk aversion. Based on a lab experiment, we confirm this hypothesis empirically.