Inspired and inspiring: Hervé Moulin and the discovery of the beauty contest game

Authors: Rosemarie Nagel, and

Mathematical Social Sciences, Vol. April, April, 2016

We draw an unusually detailed picture of a discovery, the beauty contest game - with Hervé Moulin as the center of the initial inspiration. Since its inception, the beauty contest game and the descriptive level k model has widely contributed to the growth of experimental and behavioral economics and expanded also to other areas within and outside of economics. We illustrate, in particular, the recent interaction between macroeconomic theorists and experimenters, who independently had worked on the puzzles and consequences due to beauty contest features. Furthermore, we introduce a new variety of the two-person beauty contest game with two different payoff structures that leads to different game-theoretic properties unperceived by naïve subjects and game theory experts alike.