Guessing two thirds of the group average
Question
Each participant privately writes a number between and . The winner is whoever is closest to two thirds of the mean of all the numbers. What number should you write?
Short answer
With fully rational players, ; in practice something well below . No guess above can win, so rational players avoid it; then is a ceiling, and iterating the elimination drives the unique equilibrium to . Real groups stop after a few levels of reasoning, so winning guesses are often near .
Adapted from Wilmott, Frequently Asked Questions in Quantitative Finance, ch. 10 brainteaser 'Two thirds of the average', p.354; question and answer rewritten by SelfMadeQuant.com.
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