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Testing Psychological Forward Induction and the Updating of Beliefs in the Lost Wallet Game

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  • Woods, Daniel
  • Servátka, Maroš

Abstract

This paper studies psychological forward induction and the updating of beliefs in the lost wallet game (Dufwenberg & Gneezy, 2000), which is required to derive a prediction for guilt averse agents. Our experiment tests whether the second movers psychologically induct forward and update their beliefs after observing their paired first movers’ decision by eliciting beliefs with different second mover knowledge of first mover decision, depending on treatment. We find that second movers do update their beliefs conditional on receiving information on the first mover’s action, supporting psychological forward induction.

Suggested Citation

  • Woods, Daniel & Servátka, Maroš, 2016. "Testing Psychological Forward Induction and the Updating of Beliefs in the Lost Wallet Game," MPRA Paper 69957, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69957
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    Citations

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    Cited by:

    1. Lorko, Matej & Servátka, Maroš & Zhang, Le, 2019. "Anchoring in project duration estimation," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 49-65.
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    3. Roman Inderst & Kiryl Khalmetski & Axel Ockenfels, 2019. "Sharing Guilt: How Better Access to Information May Backfire," Management Science, INFORMS, vol. 65(7), pages 3322-3336, July.
    4. Claire Rimbaud & Alice Soldà, 2024. "Avoiding the cost of your conscience: belief dependent preferences and information acquisition," Experimental Economics, Springer;Economic Science Association, vol. 27(3), pages 491-547, July.
    5. Pierpaolo Battigalli & Martin Dufwenberg, 2022. "Belief-Dependent Motivations and Psychological Game Theory," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 833-882, September.
    6. Daniel Woods & Maroš Servátka, 2019. "Nice to you, nicer to me: Does self-serving generosity diminish the reciprocal response?," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 506-529, June.
    7. Lorko, Matej & Servátka, Maroš & Zhang, Le, 2019. "How to Improve the Accuracy of Project Schedules? The Effect of Project Specification and Historical Information on Duration Estimates," MPRA Paper 95585, University Library of Munich, Germany.
    8. Gross, Till & Servátka, Maroš & Vadovič, Radovan, 2019. "Sequential vs. Simultaneous Trust," MPRA Paper 96343, University Library of Munich, Germany.

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    More about this item

    Keywords

    beliefs; experiment; guilt aversion; lost wallet game; psychological forward induction; updating;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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