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Why Is Belief-Action Consistency so Low? The Role of Belief Uncertainty

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Listed:
  • Irenaeus Wolff
  • Dominik Folli

Abstract

Experimental research typically shows that best-response rates are below what plausible error rates would suggest. We experimentally test the conjecture that observed action-belief inconsistencies are related to belief uncertainty. We rely on a belief-sampling model that has been highly successful in explaining behaviour in multi-armed bandit problems and aggregate outcomes in games, markets, and surveys. Our data shows that inducing higher belief uncertainty leads more frequently to choices that are inconsistent with stated beliefs and---in an experiment directly testing the mechanism---to stochastic belief reports. The uncertainty-inconsistency relationship continues to hold when we control for error costs econometrically in several ways.

Suggested Citation

  • Irenaeus Wolff & Dominik Folli, 2024. "Why Is Belief-Action Consistency so Low? The Role of Belief Uncertainty," TWI Research Paper Series 130, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    • Handle: RePEc:twi:respas:0130
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    Keywords

    Best Response; Belief Elicitation; Discoordination Game; Knightian Uncertainty; Errors; Elusive Beliefs;
    All these keywords.

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