Strategic Complexity and the Value of Thinking

Abstract

We leverage response-time data from repeated strategic interactions to measure the strategic complexity of a situation by how long people think on average when they face that situation (where we categorize situations according to characteristics of play in the previous round). We find that strategic complexity varies significantly across situations, and we find considerable heterogeneity in how responsive subjects’ thinking times are to complexity. We also study how variation in response times at the individual level affects success: when a subject thinks for longer than she would normally do in a particular situation, she wins less frequently and earns less.