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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, Charles

    ()
    (Université Laval)

  • Kröger, Sabine

    ()
    (Université Laval)

  • van Soest, Arthur

    ()
    (Tilburg University)

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 ("dictators") 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 proposers in the ultimatum game, a result due to proposer's 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1666.

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Length: 50 pages
Date of creation: Jul 2005
Date of revision:
Publication status: published as ' Measuring Inequity Aversion in a Heterogeneous Population using Experimental Decisions and Subjective Probabilities' in: Econometrica, 2008, 76 (4), 815-839
Handle: RePEc:iza:izadps:dp1666

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Keywords: ultimatum game; inequity aversion; subjective expectations;

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References

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  1. Carpenter, Jeffrey & Verhoogen, Eric & Burks, Stephen, 2005. "The effect of stakes in distribution experiments," Economics Letters, Elsevier, vol. 86(3), pages 393-398, March.
  2. 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.
  3. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
  4. Bellemare, Charles & Kröger, Sabine, 2003. "On Representative Trust," SFB 373 Discussion Papers 2003,24, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  5. 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.
  6. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  7. Charles Bellemare & Sabine Kroger, 2005. "On Representative Social Capital," Cahiers de recherche 0504, CIRPEE.
  8. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, Spring.
  9. Yaw Nyarko & Andrew Schotter, 2002. "An Experimental Study of Belief Learning Using Elicited Beliefs," Econometrica, Econometric Society, vol. 70(3), pages 971-1005, May.
  10. Goeree, Jacob K. & Holt, Charles A., 2000. "Asymmetric inequality aversion and noisy behavior in alternating-offer bargaining games," European Economic Review, Elsevier, vol. 44(4-6), pages 1079-1089, May.
  11. 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.
  12. 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.
  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. 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.
  15. 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.
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Citations

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Cited by:
  1. 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).
  2. Werner Guth & Carsten Schmidt & Matthias Sutter, 2002. "Bargaining outside the lab - a newspaper experiment of a three person-ultimatum game," Artefactual Field Experiments 00050, The Field Experiments Website.
  3. Christian Belzil, 2007. "Subjective Beliefs and Schooling Decisions," Post-Print halshs-00174524, HAL.
  4. 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.
  5. 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.
  6. Olivier Armantier & Nicolas Treich, 2006. "Overbidding in Independant Private-Values Auctions and Misperception of Probabilities," CIRANO Working Papers 2006s-15, CIRANO.

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