Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2007-01-29 Number: 07-015/1 Author-Name: Martin G. Kocher Author-Email: m.kocher@uva.nl Author-Workplace-Name: Universiteit van Amsterdam Author-Name: Matthias Sutter Author-Email: matthias.sutter@uibk.ac.at Author-Workplace-Name: University of Innsbruck Author-Name: Florian Wakolbinger Author-Workplace-Name: University of Innsbruck Title: The Impact of Naïve Advice and Observational Learning in Beauty-contest Games Abstract: We study the impact of advice or observation on the depth of reasoning in an experimental beauty-contest game. Both sources of information trigger faster convergence to the equilibrium. Yet, we find that subjects who receive naïve advice outperform uninformed subjects permanently, whereas subjects who observe others’ past behavior before making their decision do only have a temporary advantage over uninformed subjects. We show in a simulation that the latter result is due to subjects failing to make the most out of observing others. Classification-JEL: C70; C72; C91 Keywords: social learning; advice; observational learning; beauty-contest game File-Url: https://papers.tinbergen.nl/07015.pdf File-Format: application/pdf File-Size: 545776 bytes Handle: RePEc:tin:wpaper:20070015