Correlated Beliefs : Predicting Outcomes in 2×2 Games

Studies of strategic sophistication in experimental normal form games commonly assume that subjects' beliefs are consistent with independent choice. This paper examines whether beliefs are consistent with correlated choice. Players play a sequence of simple 2×2 normal form games with distinct opponents and no feedback. Another set of players, called predictors, report a likelihood ranking over possible outcomes. A substantial proportion of the reported rankings are consistent with the predictors believing that the choice of actions in the 2×2 game are correlated. The extent of correlation over action profiles varies systematically between the type of games (i.e., prisoner's dilemma, stag hunt, coordination, and strictly competitive) as well as the kind of payments within each type of game (i.e., high vs. low deviation payoffs and symmetric vs. asymmetric payoffs.)