The Strategy Method as an instrument for the exploration of limited rationality in oligopoly game behavior (Strategiemethode zur Erforschung des eingeschränkt rationalen Verhaltens im Rahmen eines Oligopolexperimentes) (by Reinhard Selten)

In the late 1950s and early 1960s, Heinz Sauermann and Reinhard Selten conducted a series of experiments to explore boundedly rational decision-making in strategic management games. In analogy to “thinking aloud” studies, they had initially used protocols of participants’ reports concerning their planning of choices in an experimental interaction. To standardize the procedure, Reinhard Selten induced participants to present flow charts of their planned responses for all situations that might arise in the game. These procedural representations of plans of play were complete in that they specified a response for any contingency that might arise in the play of the game but they did not explicitly consider all information sets. The review of Selten’s seminal paper embeds his “Strategiemethode” into its bounded-rationality background, on the one hand, and, on the other, its full rationality variants, as in the case of Werner Güth’s analysis of the ultimatum game.