IDEAS home Printed from https://ideas.repec.org/a/gam/jgames/v9y2018i3p50-d158155.html
   My bibliography  Save this article

Preference Based Subjective Beliefs

Author

Listed:
  • Matilde Giaccherini

    (CEIS, University of Rome Tor Vergata, 00133 Roma, Italy)

  • Giovanni Ponti

    (Departamento de Fundamentos del Análisis Económico, Universidad de Alicante, 03071 Alicante, Spain
    Department of Economics, The University of Chicago, Chicago, IL 60637, USA
    Dipartimento di Economia e Finanza, LUISS Guido Carli Roma, 00197 Roma, Italy)

Abstract

We test the empirical content of the assumption of preference dependent beliefs using a behavioral model of strategic decision making in which the rankings of individuals over final outcomes in simple games influence their beliefs over the opponent’s behavior. This approach— by analogy with Psychological Game Theory—allows for interdependence between preferences and beliefs but reverses the order of causality. We use existing evidence from a multi-stage experiment in which we first elicit distributional preferences in a Random Dictator Game, then estimate beliefs in a related 2 × 2 effort game conditional on these preferences. Our structural estimations confirm our working hypothesis on how social preferences shape beliefs: subjects with higher guilt (envy) expect others to put less (more) effort, which reduces the expected difference in payoffs.

Suggested Citation

  • Matilde Giaccherini & Giovanni Ponti, 2018. "Preference Based Subjective Beliefs," Games, MDPI, vol. 9(3), pages 1-12, July.
    • Handle: RePEc:gam:jgames:v:9:y:2018:i:3:p:50-:d:158155
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2073-4336/9/3/50/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2073-4336/9/3/50/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pedro Rey‐Biel, 2008. "Inequity Aversion and Team Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 297-320, June.
    2. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    4. George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2003. "Projection Bias in Predicting Future Utility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1209-1248.
    5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    6. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
    7. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2010. "Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts," American Economic Review, American Economic Association, vol. 100(5), pages 2261-2278, December.
    8. Bruno S. Frey & Stephan Meier, 2004. "Social Comparisons and Pro-social Behavior: Testing "Conditional Cooperation" in a Field Experiment," American Economic Review, American Economic Association, vol. 94(5), pages 1717-1722, December.
    9. Ben Greiner, 2004. "The Online Recruitment System ORSEE 2.0 - A Guide for the Organization of Experiments in Economics," Working Paper Series in Economics 10, University of Cologne, Department of Economics.
    10. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    11. Frignani, Nicola & Ponti, Giovanni, 2012. "Risk versus social preferences under the veil of ignorance," Economics Letters, Elsevier, vol. 116(2), pages 143-146.
    12. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
    13. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    14. Manski, Charles F., 2002. "Identification of decision rules in experiments on simple games of proposal and response," European Economic Review, Elsevier, vol. 46(4-5), pages 880-891, May.
    15. Ben Greiner, 2004. "The Online Recruitment System ORSEE - A Guide for the Organization of Experiments in Economics," Papers on Strategic Interaction 2003-10, Max Planck Institute of Economics, Strategic Interaction Group.
    16. Yaw Nyarko & Andrew Schotter, 2002. "An Experimental Study of Belief Learning Using Elicited Beliefs," Econometrica, Econometric Society, vol. 70(3), pages 971-1005, May.
    17. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
    18. Steven D. Levitt, 2004. "Why are gambling markets organised so differently from financial markets?," Economic Journal, Royal Economic Society, vol. 114(495), pages 223-246, April.
    19. Bruno Frey & Stephan Meier, 2004. "In a field experiment," Natural Field Experiments 00243, The Field Experiments Website.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nagore Iriberri & Pedro Rey‐Biel, 2013. "Elicited beliefs and social information in modified dictator games: What do dictators believe other dictators do?," Quantitative Economics, Econometric Society, vol. 4(3), pages 515-547, November.
    2. Kurt A. Ackermann & Ryan O. Murphy, 2019. "Explaining Cooperative Behavior in Public Goods Games: How Preferences and Beliefs Affect Contribution Levels," Games, MDPI, vol. 10(1), pages 1-34, March.
    3. Khalmetski, Kiryl & Ockenfels, Axel & Werner, Peter, 2015. "Surprising gifts: Theory and laboratory evidence," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 163-208.
    4. Bernd Irlenbusch & Janna Ter Meer, 2015. "Lying in public good games with and without punishment," Cologne Graduate School Working Paper Series 06-02, Cologne Graduate School in Management, Economics and Social Sciences.
    5. Kai Barron, 2021. "Belief updating: does the ‘good-news, bad-news’ asymmetry extend to purely financial domains?," Experimental Economics, Springer;Economic Science Association, vol. 24(1), pages 31-58, March.
    6. Kim Kaivanto & Eike Kroll, 2014. "Alternation bias and reduction in St. Petersburg gambles," Working Papers 65600286, Lancaster University Management School, Economics Department.
    7. Simon Gächter & Daniele Nosenzo & Martin Sefton, 2012. "The Impact of Social Comparisons on Reciprocity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1346-1367, December.
    8. Mamadou Gueye & Nicolas Quérou & Raphaël Soubeyran, 2018. "Does equity induce inefficiency? An experiment on coordination," Working Papers hal-02790603, HAL.
    9. Kim, Jeongbin & Putterman, Louis & Zhang, Xinyi, 2022. "Trust, Beliefs and Cooperation: Excavating a Foundation of Strong Economies," European Economic Review, Elsevier, vol. 147(C).
    10. Alexia Gaudeul, 2013. "Social preferences under uncertainty," Jena Economics Research Papers 2013-024, Friedrich-Schiller-University Jena.
    11. Müller, Stephan & Rau, Holger A., 2019. "Decisions under uncertainty in social contexts," Games and Economic Behavior, Elsevier, vol. 116(C), pages 73-95.
    12. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2010. "Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts," American Economic Review, American Economic Association, vol. 100(5), pages 2261-2278, December.
    13. Engel, Christoph & Zhurakhovska, Lilia, 2014. "Conditional cooperation with negative externalities – An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 252-260.
    14. McDonald, Ian M. & Nikiforakis, Nikos & Olekalns, Nilss & Sibly, Hugh, 2013. "Social comparisons and reference group formation: Some experimental evidence," Games and Economic Behavior, Elsevier, vol. 79(C), pages 75-89.
    15. Charles Bellemare & Alexander Sebald & Sigrid Suetens, 2018. "Heterogeneous guilt sensitivities and incentive effects," Experimental Economics, Springer;Economic Science Association, vol. 21(2), pages 316-336, June.
    16. Kerschbamer, Rudolf, 2015. "The geometry of distributional preferences and a non-parametric identification approach: The Equality Equivalence Test," European Economic Review, Elsevier, vol. 76(C), pages 85-103.
    17. Natalia Montinari & Michela Rancan, 2018. "Risk taking on behalf of others: The role of social distance," Journal of Risk and Uncertainty, Springer, vol. 57(1), pages 81-109, August.
    18. Pablo Guillen & Danielle Merrett & Robert Slonim, 2015. "A New Solution for the Moral Hazard Problem in Team Production," Management Science, INFORMS, vol. 61(7), pages 1514-1530, July.
    19. David Macro & Jeroen Weesie, 2016. "Inequalities between Others Do Matter: Evidence from Multiplayer Dictator Games," Games, MDPI, vol. 7(2), pages 1-23, April.
    20. Julius Pahlke & Sebastian Strasser & Ferdinand Vieider, 2015. "Responsibility effects in decision making under risk," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 125-146, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jgames:v:9:y:2018:i:3:p:50-:d:158155. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.