A Simple Investment Game Experiment for the Classroom

Ananish Chaudhuri

Game Theory
Welfare Economics: Allocative Efficiency, Externalities, Fairness, Altruism

Non-computerized experiment

We present a simple way of carrying out the Investment Game, introduced by Berg, Dickhaut and McCabe (1995) inside the classroom for instructional purposes. This game is a handy way of illustrating the principle of backward induction in sequential move games. In a slight deviation from the original design we allow each subject to play both as a Sender as well as a Receiver.