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Higher-order Beliefs in a Sequential Social Dilemma

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  • Evan M. Calford
  • Anujit Chakraborty

Abstract

Do experimental subjects have consistent first and higher-order beliefs about other’s preferences? How does any inconsistency affect strategic decisions? We introduce a simple four-player sequential social dilemma where actions reveal first and higher-order beliefs. The unique sub game perfect Nash equilibrium (SPNE) is observed less than 5% of the time, even though our diagnostic treatments show that a majority of our subjects are self-interested, higher-order rational and have accurate first-order beliefs. In our data, strategic play vastly deviates from Nash predictions because first-order and higher-order beliefs are inconsistent for most subjects.

Suggested Citation

  • Evan M. Calford & Anujit Chakraborty, 2022. "Higher-order Beliefs in a Sequential Social Dilemma," ANU Working Papers in Economics and Econometrics 2022-681, Australian National University, College of Business and Economics, School of Economics.
    • Handle: RePEc:acb:cbeeco:2022-681
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    More about this item

    Keywords

    Experimental economics; Higher-order beliefs; Social dilemma;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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