A Keynesian beauty contest is a concept developed by John Maynard Keynes to explain price fluctuations in equity markets. It is the view that much of investment is driven by expectations about what other investors think, rather than expectations about the fundamental profitability of a particular investment. Upon reviewing the set up of our experiment compared to that in the article “A Keynesian Beauty Contest in the Classroom” I found several differences in procedure that may have affected the results in our classroom version. Furthermore, I will point out what aspects of the experiment can be modified in order to find more legitimate and honest results.

In this experiment, rational answer would be all players playing 0. This is because of the following reasoning: All players have the same information, and are assumed to be equally rational. This is referred to as Nash equilibrium in Game theory. The experiment shows an easy way to test how theoretical assumptions in a lecture. The results represent pretty much the theoretical hypothesis that we devote our intelligences to anticipating what average opinion expects the average opinion to be. With doing more rounds, more smaller number we will get until we reach the Nash equilibrium. The detailed analysis of the results showed that students are learning quickly. A naïve strategy would be to choose the six faces that, in the opinion of the entrant, are the most beautiful. A more sophisticated contest entrant, wishing to maximize the chances of winning a prize, would think about what the majority perception of beauty is, and then make a selection based on some inference from their knowledge of public perceptions. This can be carried one step further to take into account the fact that other entrants would each have their own opinion of what public perceptions are. Thus the strategy can be extended to the next order,