Incomplete Information Models of Guilt Aversion in the Trust Game
AbstractIn the theory of psychological games it is assumed that players' preferences on material consequences depend on endogenous beliefs. Most of the applications of this theoretical framework assume that the psychological utility functions representing such preferences are common knowledge. But this is often unrealistic. In particular, it cannot be true in experimental games where players are subjects drawn at random from a population. Therefore an incomplete-information methodology is called for. We take a first step in this direction, focusing on models of guilt aversion in the Trust Game. We consider two alternative modeling assumptions: (i) guilt aversion depends on the role played in the game, because only the "trustee" can feel guilt for letting the co-player down, (ii) guilt aversion is independent of the role played in the game. We show how the set of Bayesian equilibria changes as the upper bound on guilt sensitivity varies, and we compare this with the complete-information case. Our analysis illustrates the incomplete-information approach to psychological games and can help organize experimental results in the Trust Game. JEL classification: C72, C91, D03. Keywords: Psychological games, Trust Game, guilt, incomplete information.
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Bibliographic InfoPaper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 480.
Date of creation: 2013
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Other versions of this item:
- Giuseppe Attanasi & Pierpaolo Battigalli & Elena Manzoni, 2013. "Incomplete Information Models of Guilt Aversion in the Trust Game," Working Papers 246, University of Milano-Bicocca, Department of Economics, revised Jun 2013.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-24 (All new papers)
- NEP-CBE-2013-05-24 (Cognitive & Behavioural Economics)
- NEP-CTA-2013-05-24 (Contract Theory & Applications)
- NEP-EVO-2013-05-24 (Evolutionary Economics)
- NEP-EXP-2013-05-24 (Experimental Economics)
- NEP-HPE-2013-05-24 (History & Philosophy of Economics)
- NEP-MIC-2013-05-24 (Microeconomics)
- NEP-SOC-2013-05-24 (Social Norms & Social Capital)
- NEP-UPT-2013-05-24 (Utility Models & Prospect Theory)
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