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Estimating the causal effect of beliefs on contributions in repeated public good games

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  • Alexander Smith

Abstract

We use instrumental variables for estimating the causal effect of beliefs on contributions in repeated public good games. The effect is about half as large as suggested by ordinary least squares. Thus, we present evidence that beliefs have a causal effect on contributions, but also that beliefs are endogenous. We compare the causal, belief-based model of contributions to alternative models based on matching the previous contributions of others and responding to one’s deviation from the average in the previous round. The causal, belief-based model performs well, indicating that beliefs have a central role in determining contributions. Copyright Economic Science Association 2013

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  • Alexander Smith, 2013. "Estimating the causal effect of beliefs on contributions in repeated public good games," Experimental Economics, Springer;Economic Science Association, vol. 16(3), pages 414-425, September.
    • Handle: RePEc:kap:expeco:v:16:y:2013:i:3:p:414-425
    DOI: 10.1007/s10683-012-9345-5
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    More about this item

    Keywords

    Public good games; Beliefs; Conditional cooperation; Reciprocity; Instrumental variables; C81; C91; C92; H41;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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