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Beliefs and Actions in the Trust Game: Creating Instrumental Variables to Estimate the Causal Effect

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  • Miguel A. Costa-Gomes
  • Steffen Huck
  • Georg Weizsäcker

Abstract

In many economic contexts, an elusive variable of interest is the agent's expectation about relevant events, e.g. about other agents' behavior. Recent experimental studies as well as surveys have asked participants to state their beliefs explicitly, but little is known about the causal relation between beliefs and other behavioral variables. This paper discusses the possibility of creating exogenous instrumental variables for belief statements, by shifting the probabilities of the relevant events. We conduct trust game experiments where the amount sent back by the second player (trustee) is exogenously varied by a random process, in a way that informs only the first player (trustor) about the realized variation. The procedure allows detecting causal links from beliefs to actions under plausible assumptions. The IV estimates indicate a significant causal effect, comparable to the connection between beliefs and actions that is suggested by OLS analyses.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.346460.de/dp969.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 969.

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Length: 42 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp969

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Keywords: Social capital; trust game; instrumental variables; belief elicitation;

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References

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  1. Charles Bellemare & Alexander Sebald & Martin Strobel, 2010. "Measuring the Willingness to Pay to Avoid Guilt: Estimation using Equilibrium and Stated Belief Models," Discussion Papers 10-08, University of Copenhagen. Department of Economics.
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Citations

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Cited by:
  1. Trautmann, S.T. & Kuilen, G. van de, 2011. "Belief Elicitation: A Horse Race among Truth Serums," Discussion Paper 2011-117, Tilburg University, Center for Economic Research.
  2. Francesco Farina & Gianluca Grimalda, 2011. "A cross-country experimental comparison of preferences for redistribution," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 0211, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
  3. Jürgen Bracht & Tobias Regner, 2011. "Moral Emotions and Partnership," Jena Economic Research Papers 2011-028, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Karl Schlag & James Tremewan & Joel van der Weele, 2014. "A Penny for Your Thoughts:A Survey of Methods for Eliciting Beliefs," Vienna Economics Papers 1401, University of Vienna, Department of Economics.
  5. Regner, Tobias & Riener, Gerhard, 2012. "Motivational cherry picking," DICE Discussion Papers 68, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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