Developmental equilibrium selection

Abstract

This paper studies whether using Payoff dominance is more or less natural than Risk dominance through a sample of more than a thousand of preadolescents and teenagers (n = 1, 254 , av.age = 12.8, 48%female). Participants in two coordination games (within-subjects) were asked to select a strategy but also to state a reason explaining their choice. They also completed a CRT, a short financial quiz and a risk decision task. Using both the strategies chosen by the participants and their arguments, we determine whether they use payoffs or risk as devices to coordinate. Our research provides four main findings. First, using payoff dominance is more natural than risk dominance. Second, the use both devices is highly correlated with individual cognitive abilities. Third, strategic sophistication does not improve with age. Last, individual preferences for risk do not explain the use of risk dominance, and no gender differences were found. This evidence suggests that the acquisition of cognitive abilities provides essential skills that foster a greater capacity for strategic thinking. Finally, the analysis of chosen strategies without stated reasoning or vice versa provides the very same results.