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Learning about a Class of Belief-Dependent Preferences without Information on Beliefs

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  • Bellemare, Charles

    ()
    (Université Laval)

  • Sebald, Alexander

    ()
    (University of Copenhagen)

Abstract

We show how to bound the effect of belief-dependent preferences on choices in sequential two-player games without information about the (higher-order) beliefs of players. The approach can be applied to a class of belief-dependent preferences which includes reciprocity (Dufwenberg and Kirchsteiger, 2004) and guilt aversion (Battigalli and Dufwenberg, 2007) as special cases. We show how the size of the bounds can be substantially reduced by exploiting a specific invariance property common to preferences in this class. We illustrate our approach by analyzing data from a large scale experiment conducted with a sample of participants randomly drawn from the Dutch population. We find that behavior of players in the experiment is consistent with significant guilt aversion: some groups of the population are willing to pay at least 0.16e to avoid 'letting down' another player by 1e. We also find that our approach produces narrow and thus very informative bounds on the effect of reciprocity in the games we consider. Our bounds suggest the model of reciprocity we consider is not a significant determinant of decisions in our experiment.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5957.

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Length: 34 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5957

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Keywords: belief-dependent preferences; guilt aversion; reciprocity; partial identification;

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References

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  1. Andrew Chesher, 2009. "Single equation endogenous binary reponse models," CeMMAP working papers CWP23/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  2. Victor Chernozhukov & Sokbae 'Simon' Lee & Adam Rosen, 2009. "Intersection Bounds: estimation and inference," CeMMAP working papers CWP19/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Bellemare, Charles & Kröger, Sabine, 2003. "On Representative Trust," SFB 373 Discussion Papers 2003,27, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  4. Geert Dhaene & Jan Bouckaert, 2007. "Sequential reciprocity in two-player, two-stages games: an experimental analysis," Center for Economic Studies - Discussion papers ces0717, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  5. Bellemare, Charles & Kröger, Sabine, 2004. "On Representative Social Capital," IZA Discussion Papers 1145, Institute for the Study of Labor (IZA).
  6. Bellemare, Charles & Sebald, Alexander & Strobel, Martin, 2010. "Measuring the Willingness to Pay to Avoid Guilt: Estimation Using Equilibrium and Stated Belief Models," IZA Discussion Papers 4803, Institute for the Study of Labor (IZA).
  7. Blanco, Mariana & Engelmann, Dirk & Koch, Alexander K. & Normann, Hans-Theo, 2009. "Preferences and Beliefs in a Sequential Social Dilemma: A Within-Subjects Analysis," IZA Discussion Papers 4624, Institute for the Study of Labor (IZA).
  8. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May.
  9. Charles Bellemare & Luc Bissonnette & Sabine Kröger, 2010. "Bounding preference parameters under different assumptions about beliefs: a partial identification approach," Experimental Economics, Springer, vol. 13(3), pages 334-345, September.
  10. Charles Bellemare & Sabine Kröger & Arthur van Soest, 2008. "Measuring Inequity Aversion in a Heterogeneous Population Using Experimental Decisions and Subjective Probabilities," Econometrica, Econometric Society, vol. 76(4), pages 815-839, 07.
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Cited by:
  1. Björn Bartling & Nick Netzer, 2014. "An Externality-Robust Auction: Theory and Experimental Evidence," CESifo Working Paper Series 4771, CESifo Group Munich.
  2. Björn Bartling & Nick Netzer, 2014. "An externality-robust auction: theory and experimental evidence," ECON - Working Papers 153, Department of Economics - University of Zurich.

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