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Hierarchical Bayesian Analysis of Biased Beliefs and Distributional Other-Regarding Preferences

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  • Ozan Aksoy

    ()
    (ICS/Department of Sociology, Faculty of Social Sciences, Utrecht University, Padualaan 14, 3584 CH, The Netherlands)

  • Jeroen Weesie

    ()
    (ICS/Department of Sociology, Faculty of Social Sciences, Utrecht University, Padualaan 14, 3584 CH, The Netherlands)

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    Abstract

    This study investigates the relationship between an actor’s beliefs about others’ other-regarding (social) preferences and her own other-regarding preferences, using an “avant-garde” hierarchical Bayesian method. We estimate two distributional other-regarding preference parameters, α and β, of actors using incentivized choice data in binary Dictator Games. Simultaneously, we estimate the distribution of actors’ beliefs about others α and β, conditional on actors’ own α and β, with incentivized belief elicitation. We demonstrate the benefits of the Bayesian method compared to it’s hierarchical frequentist counterparts. Results show a positive association between an actor’s own (α; β ) and her beliefs about average (α; β) in the population. The association between own preferences and the varianc e in beliefs about others’ preferences in the population, however, is curvilinear for α and insignificant for β. These results are partially consistent with the cone effect [1,2] which is described in detail below. Because in the Bayesian-Nash equilibrium concept, beliefs and own preferences are assumed to be independent, these results cast doubt on the application of the Bayesian-Nash equilibrium concept to experimental data.

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    Bibliographic Info

    Article provided by MDPI, Open Access Journal in its journal Games.

    Volume (Year): 4 (2013)
    Issue (Month): 1 (February)
    Pages: 66-88

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    Handle: RePEc:gam:jgames:v:4:y:2013:i:1:p:66-88:d:23657

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    Related research

    Keywords: Bayesian statistics; Dictator Game; other-regarding preferences; beliefs;

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    References

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    1. Fehr, Dietmar & Kübler, Dorothea & Danz, David N., 2008. "Information and Beliefs in a Repeated Normal-Form Game," IZA Discussion Papers 3627, Institute for the Study of Labor (IZA).
    2. Offerman, Theo & Sonnemans, Joep & Schram, Arthur, 1996. "Value Orientations, Expectations and Voluntary Contributions in Public Goods," Economic Journal, Royal Economic Society, vol. 106(437), pages 817-45, July.
    3. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
    4. Blanco, Mariana & Engelmann, Dirk & Normann, Hans Theo, 2011. "A within-subject analysis of other-regarding preferences," Games and Economic Behavior, Elsevier, vol. 72(2), pages 321-338, June.
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    14. Croson, Rachel T. A., 2000. "Thinking like a game theorist: factors affecting the frequency of equilibrium play," Journal of Economic Behavior & Organization, Elsevier, vol. 41(3), pages 299-314, March.
    15. Engelmann,Dirk & Strobel,Martin, 2002. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," Research Memorandum 015, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    16. Mariana Blanco & Dirk Engelmann & Alexander Koch & Hans-Theo Normann, 2010. "Belief elicitation in experiments: is there a hedging problem?," Experimental Economics, Springer, vol. 13(4), pages 412-438, December.
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