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DOI 10.1007/s10683-006-9135-z Mental processes and strategic equilibration: An fMRI

Summary: Exp Econ
DOI 10.1007/s10683-006-9135-z
Mental processes and strategic equilibration: An fMRI
study of selling strategies in second price auctions
David M. Grether Charles R. Plott
Daniel B. Rowe Martin Sereno John M. Allman
Received: 23 June 2004 / Revised: 16 May 2006 / Accepted: 16 May
C Economic Science Association 2007
Abstract This study is the first to attempt to isolate a relationship between cognitive
activity and equilibration to a Nash Equilibrium. Subjects, while undergoing fMRI
scans of brain activity, participated in second price auctions against a single competitor
following predetermined strategy that was unknown to the subject. For this auction
there is a unique strategy that will maximize the subjects' earnings, which is also a
Nash equilibrium of the associated game theoretic model of the auction. As is the case
with all games, the bidding strategies of subjects participating in second price auctions
most often do not reflect the equilibrium bidding strategy at first but with experience,
typically exhibit a process of equilibration, or convergence toward the equilibrium.
This research is focused on the process of convergence.
In the data reported here subjects participated in sixteen auctions, after which


Source: Allman, John M. - Division of Biology, California Institute of Technology


Collections: Biology and Medicine