Journal of Economic Behavior & Organization Vol. 42 (2000) 483–521 Mixed strategies and iterative elimination of strongly dominated strategies: an experimental investigation of states of knowledge Amnon Rapoport a,∗,1 , Wilfred Amaldoss b,2 a Department of Mangement & Policy, The Eller School of Business and Public Administration, 405 McClelland Hall, University of Arizona, Tucson, AZ 85721, USA b Krannert Gradaute School of Management, Purdue University, West Lafayette, IN 47906, USA Received 5 May 1998; received in revised form 30 August 1999; accepted 31 August 1999 Abstract The iterative elimination of strongly dominated strategies (IESDS) and mixed-equilibrium solu- tion concepts are studied in an iterated two-person investment game with discrete strategy spaces, non-recoverable investments, and either equal or unequal investment capital. In this game, the player investing the largest amount wins the competition and receives a fixed reward; ties are counted as losses. Both cases of symmetric and asymmetric dyads are studied theoretically and experimen- tally. Results from two experiments provide support for the mixed-strategy equilibrium solution on the aggregate but not the individual level, and evidence for a hierarchy of bounded IESDS. © 2000 Elsevier Science B.V. All rights reserved. JEL classification: C72; C92 Keywords: Mixed strategies; Iterative deletion of strongly dominated strategies; Bounded rationality; Adaptive learning 1. Introduction Iterative elimination of strongly dominated strategies (IESDS) and mixed-strategy Nash equilibrium are two of the most basic solution concepts of non-cooperative game theory. The assumptions on the players’ state of knowledge that are sufficient to derive these ∗ Corresponding author. Tel.: +1-520-621-9325; fax: +1-520-621-4171. E-mail address: amnon@u.arizona.edu (A. Rapoport) 1 Professor of Management and Policy. 2 Assistant Professor of Marketing. 0167-2681/00/$ – see front matter © 2000 Elsevier Science B.V. All rights reserved. PII:S0167-2681(00)00101-3