Pooling or fooling? An experiment on signaling

We compare two zero-sum versions of the so called Chinos Game, a traditional parlour game played in many countries. In one version, which we call Preemption Scenario, the first player who guesses right wins the prize. In the alternative version, called the Copycat Scenario, the last player who guesses right wins the prize. While in the Preemption Scenario there is a unique and fully revealing equilibrium, in the Copycat Scenario all equilibria have first movers pool (i.e. hide) their private information. Our experimental evidence shows, however, that in the latter case early movers do not pool but try to fool, i.e. to “lie” by systematically distorting behavior relative to equilibrium play. In fact, doing so they benefit, although the resulting gains diminish as the game proceeds. This highlights the point that, as players adjust their behavior o↵ equilibrium, they also attempt to exploit the induced strategic uncertainty whenever the game allows for this possibility.