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Actions and Beliefs: Estimating Distribution-Based Preferences Using a Large Scale Experiment with Probability Questions on Expectations

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Author Info

  • Bellemare, C.
  • Kroger, S.
  • Soest, A.H.O. van

    (Tilburg University, Center for Economic Research)

Abstract

We combine the choice data of proposers and responders in the ultimatum game, their expectations elicited in the form of subjective probability questions, and the choice data of proposers ("dictator") in a dictator game to estimate a structural model of decision making under uncertainty.We use a large and representative sample of subjects drawn from the Dutch population.Our results indicate that there is considerable heterogeneity in preferences for equity in the population.Changes in preferences have an important impact on decisions of dictators in the dictator game and responders in the ultimatum game, but a smaller impact on decisions of proposer's in the ultimatum game, a result due to proposers subjective expectations about responders' decisions.The model which uses subjective data on expectations has better predictive power and lower noise level than a model which assumes that players have rational expectations.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2005-82.

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Date of creation: 2005
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Handle: RePEc:dgr:kubcen:200582

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Web page: http://center.uvt.nl

Related research

Keywords: ultimatum game; inquity aversion; subjective expectations;

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References

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  1. Heike Hennig-Schmidt & Zhu-Yu Li & Chaoliang Yang, 2004. "Why People Reject Advantageous Offers – Non-monotone Strategies in Ultimatum Bargaining," Bonn Econ Discussion Papers bgse22_2004, University of Bonn, Germany.
  2. Jacob K. Goeree & Charles A. Holt, . "Asymmetric Inequality Aversion and Noisy Behavior in Alternating-Offer Bargaining Games," Virginia Economics Online Papers 329, University of Virginia, Department of Economics.
  3. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2001. "Estimating Individual Discount Rates in Denmark: A Field Experiment," NCEE Working Paper Series 200102, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2001.
  4. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Carpenter, Jeffrey & Verhoogen, Eric & Burks, Stephen, 2005. "The effect of stakes in distribution experiments," Economics Letters, Elsevier, vol. 86(3), pages 393-398, March.
  6. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
  7. Oxoby, Robert J. & McLeish, Kendra N., 2004. "Sequential decision and strategy vector methods in ultimatum bargaining: evidence on the strength of other-regarding behavior," Economics Letters, Elsevier, vol. 84(3), pages 399-405, September.
  8. Charles Bellemare & Sabine Kroger, 2005. "On representative social capital," Artefactual Field Experiments 00006, The Field Experiments Website.
  9. Huck, Steffen & Müller, Wieland & Normann, Hans-Theo, 1999. "Stackelberg beats Cournot: On collusion and efficiency in experimental markets," SFB 373 Discussion Papers 1999,32, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  10. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
  11. Yaw Nyarko & Andrew Schotter, 2002. "An Experimental Study of Belief Learning Using Elicited Beliefs," Econometrica, Econometric Society, vol. 70(3), pages 971-1005, May.
  12. Blount, Sally, 1995. "When Social Outcomes Aren't Fair: The Effect of Causal Attributions on Preferences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(2), pages 131-144, August.
  13. Manski, Charles F., 2002. "Identification of decision rules in experiments on simple games of proposal and response," European Economic Review, Elsevier, vol. 46(4-5), pages 880-891, May.
  14. Andreas Ortmann & John Fitzgerald & Carl Boeing, 2000. "Trust, Reciprocity, and Social History: A Re-examination," Experimental Economics, Springer, vol. 3(1), pages 81-100, June.
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Cited by:
  1. Alexander W. Cappelen & Astri Drange Hole & Erik Ø Sørensen & Bertil Tungodden, 2007. "The Pluralism of Fairness Ideals: An Experimental Approach," American Economic Review, American Economic Association, vol. 97(3), pages 818-827, June.
  2. Werner Güth & Carsten Schmidt & Matthias Sutter, 2007. "Bargaining outside the lab - a newspaper experiment of a three-person ultimatum game," Economic Journal, Royal Economic Society, vol. 117(518), pages 449-469, 03.
  3. Belzil, Christian, 2007. "Subjective Beliefs and Schooling Decisions," IZA Discussion Papers 2820, Institute for the Study of Labor (IZA).
  4. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2007. "An experiment on markets and contracts : do social preferences determine corporate culture?," Economics Working Papers we072010, Universidad Carlos III, Departamento de Economía.
  5. Olivier Armantier & Nicolas Treich, 2006. "Overbidding in Independant Private-Values Auctions and Misperception of Probabilities," CIRANO Working Papers 2006s-15, CIRANO.
  6. Bellemare, Charles & Bissonnette, Luc & Kröger, Sabine, 2007. "Flexible Approximation of Subjective Expectations Using Probability Questions: An Application to the Investment Game," IZA Discussion Papers 3121, Institute for the Study of Labor (IZA).

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