Correlated beliefs: Predicting outcomes in 2 × 2 games.

Studies of strategic sophistication in experimental normal form games commonly assume that subjects' beliefs are consistent with independent choice. This paper examines whether beliefs are consistent with correlated choice. Players play a sequence of 2×2 normal form games with distinct opponents and no feedback. Another set of players, called predictors, report a likelihood ranking over possible outcomes. A substantial proportion of the reported rankings are consistent with the predictors believing that the choice of actions in the 2×2 game are correlated. Predictions seem to be correlated around focal outcomes and the extent of correlation over action profiles varies systematically between games (i.e., prisoner's dilemma, stag hunt, coordination, and strictly competitive).