Strategic sophistication of individuals and teams. Experimental evidence

- This paper compares the strategic sophistication of individuals and teams based on an experimental test.
- Individuals and teams of three subjects make choices in normal form games, first and second order point beliefs are elicited.
- Teams play the Nash equilibrium strategy significantly more often, their choices are more often a best response to stated beliefs.
- Distributional preferences make equilibrium play less likely.
- The estimated probability to play strategically is 62% for teams and 40% for individuals, they differ in higher order beliefs.

Many important decisions require strategic sophistication. We examine experimentally whether teams act more strategically than individuals. We let individuals and teams make choices in simple games, and also elicit first- and second-order beliefs. We find that teams play the Nash equilibrium strategy significantly more often, and their choices are more often a best response to stated first order beliefs. Distributional preferences make equilibrium play less likely. Using a mixture model, the estimated probability to play strategically is 62% for teams, but only 40% for individuals. A model of noisy introspection reveals that teams differ from individuals in higher order beliefs.