The impact of meaningful context on strategic play in signaling games

Psychologists have provided abundant evidence that behavior can differ in fundamental ways when problems are embedded in a meaningful, as opposed to abstract, context. Our paper explores the effects of meaningful context on behavior in a signaling game experiment. Meaningful context significantly increases the initial level of strategic play. This effect fades over time, so that meaningful context partially substitutes for experience. There is also evidence that meaningful context can fundamentally affect subjects' reasoning processes. These results suggest that meaningful context might better capture behavior in field settings and improve the performance of equilibrium refinements for certain games. (C) 2003 Elsevier Science B.V. All rights reserved.