Does mutual knowledge of preferences lead to more Nash equilibrium play? Experimental evidence

Nash equilibrium often does not seem to accurately predict behavior. In experimental game theory, it is usually assumed that the monetary payoffs in the game represent subjects’ utilities. However, subjects may actually play a very different game. In this case, mutual knowledge of preferences may not be satisfied. In our experiment, we first elicit subjects’ preferences over the monetary payoffs for all players. This allows us to identify equilibria in the games that subjects actually are playing (the preference games). We then examine whether revealing other subjects’ preferences leads to more equilibrium play and find that this information indeed has a significant effect. Furthermore, it turns out that subjects are more likely to play maxmin and maxmax strategies than Nash equilibrium strategies.