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A finite mixture analysis of beauty-contest data using generalized beta distributions

Published online by Cambridge University Press:  14 March 2025

Antoni Bosch-Domènech ,
José G. Montalvo ,
Rosemarie Nagel  and
Albert Satorra
Antoni Bosch-Domènech
Affiliation:
Department of Economics and Business, Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain
José G. Montalvo
Affiliation:
Department of Economics and Business, Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain
Rosemarie Nagel
Affiliation:
Department of Economics and Business, Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain
Albert Satorra*
Affiliation:
Department of Economics and Business, Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain
*
e-mail: albert.satorra@upf.edu
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Abstract

This paper introduces a mixture model based on the beta distribution, without pre-established means and variances, to analyze a large set of Beauty-Contest data obtained from diverse groups of experiments (Bosch-Domènech et al. 2002). This model gives a better fit of the experimental data, and more precision to the hypothesis that a large proportion of individuals follow a common pattern of reasoning, described as Iterated Best Reply (degenerate), than mixture models based on the normal distribution. The analysis shows that the means of the distributions across the groups of experiments are pretty stable, while the proportions of choices at different levels of reasoning vary across groups.

Keywords

Beauty-contest experimentsDecision theoryReasoning hierarchyFinite mixture distributionBeta distributionEM algorithm

JEL classification

C14: Semiparametric and Nonparametric Methods: General C91: Laboratory, Individual Behavior C72: Noncooperative Games
Type
Research Article
Information
Experimental Economics , Volume 13 , Issue 4 , December 2010 , pp. 461 - 475
Copyright
Copyright © Economic Science Association 2010

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Footnotes

We thank the editor and two referees for insightful comments that helped improve the manuscript. Thanks are also due to the Spanish Ministerio de Educación y Ciencia for financial help under research projects SEJ2005-03891/ECON (AB-D), SEJ2006-135 and SEJ2007-64340, and by the Barcelona GSE research network and the Fellowship Icrea Academia, Generalitat de Catalunya.

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