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Measuring the Willingness to Pay to Avoid Guilt: Estimation using Equilibrium ad Stated Belief Models

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  • Charles Bellemare
  • Alexander Sebald
  • Martin Strobel

Abstract

We estimate structural models of guilt aversion to measure the population level of willingness to pay (WTP) to avoid feeling guilt by letting down another player. We compare estimates of WTP under the assumption that higher-order beliefs are in equilibrium (i.e. consistent with the choice distribution) with models estimated using stated beliefs which relax the equilibrium requirement. We estimate WTP in the later case by allowing stated beliefs to be correlated with guilt aversion, thus controlling for a possible source of a consensus effect. All models are estimated using data from an experiment of proposal and response conducted with a large and representative sample of the Dutch population. Our range of estimates suggests that responders are willing to pay between 0.40 and 0.80 Euro to avoid letting down proposers by 1 Euro. Furthermore, we find that WTP estimated using stated beliefs is substantially overestimated (by a factor of two) when correlation between preferences and beliefs is not controlled for. Finally, we find no evidence that WTP is significantly related to the observable socio-economic characteristics of players.

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Bibliographic Info

Paper provided by CIRPEE in its series Cahiers de recherche with number 1011.

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Date of creation: 2010
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Handle: RePEc:lvl:lacicr:1011

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Keywords: Guilt aversion; Willingness to pay; Equilibrium and stated beliefs models;

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References

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  1. Charness, Gary & Rabin, Matthew, 2004. "Expressed Preferences and Behavior in Experimental Games," Department of Economics, Working Paper Series qt37p1s4rs, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Bellemare, Charles & Kröger, Sabine, 2004. "On Representative Social Capital," IZA Discussion Papers 1145, Institute for the Study of Labor (IZA).
  3. Falk, Armin & Fehr, Ernst & Fischbacher, Urs, 2008. "Testing theories of fairness--Intentions matter," Games and Economic Behavior, Elsevier, vol. 62(1), pages 287-303, January.
  4. Dirk Engelmann & Martin Strobel, 2000. "The False Consensus Effect Disappears if Representative Information and Monetary Incentives Are Given," Experimental Economics, Springer, vol. 3(3), pages 241-260, December.
  5. Christoph Vanberg, 2008. "Why Do People Keep Their Promises? An Experimental Test of Two Explanations -super-1," Econometrica, Econometric Society, vol. 76(6), pages 1467-1480, November.
  6. John Kagel & Katherine Wolfe, 2001. "Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game," Experimental Economics, Springer, vol. 4(3), pages 203-219, December.
  7. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May.
  8. 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.
  9. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  10. Ellingsen, Tore & Johannesson, Magnus & Tjøtta, Sigve & Torsvik, Gaute, 2007. "Testing Guilt Aversion," Working Paper Series in Economics and Finance 683, Stockholm School of Economics.
  11. Margin Dufwenberg & Georg Kirchsteiger, 2001. "A Theory of Sequential Reciprocity," Levine's Working Paper Archive 563824000000000090, David K. Levine.
  12. Jeffrey Racine, 2008. "Nonparametric econometrics: a primer (in Russian)," Quantile, Quantile, issue 4, pages 7-56, March.
  13. Muller, Werner G & Ponce de Leon, Antonio C M, 1996. "Optimal Design of an Experiment in Economics," Economic Journal, Royal Economic Society, vol. 106(434), pages 122-27, January.
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Citations

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Cited by:
  1. 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.
  2. Giuseppe Attanasi & Pierpaolo Battigalli & Rosemarie Nagel, 2013. "Disclosure of Belief-Dependent Preferences in a Trust Game," Working Papers 506, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Charles Bellemare & Alexander Sebald, 2011. "Learning about a Class of Belief-Dependent Preferences without Information on Beliefs," Cahiers de recherche 1125, CIRPEE.
  4. Alexander Smith, 2013. "Estimating the causal effect of beliefs on contributions in repeated public good games," Experimental Economics, Springer, vol. 16(3), pages 414-425, September.
  5. Kiryl Khalmetski & Axel Ockenfels & Peter Werner, 2013. "Surprising Gifts - Theory and Laboratory Evidence," Working Paper Series in Economics 61, University of Cologne, Department of Economics.
  6. Manski, Charles F. & Neri, Claudia, 2013. "First- and second-order subjective expectations in strategic decision-making: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 81(C), pages 232-254.
  7. Engelmann, Dirk & Strobel, Martin, 2012. "Deconstruction and reconstruction of an anomaly," Games and Economic Behavior, Elsevier, vol. 76(2), pages 678-689.
  8. Costa-Gomes, Miguel A. & Huck, Steffen & Weizsäcker, Georg, 2012. "Beliefs and actions in the trust game: Creating instrumental variables to estimate the causal effect," Discussion Papers, Research Unit: Economics of Change SP II 2012-302, Social Science Research Center Berlin (WZB).
  9. 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.
  10. Riccardo Ghidoni & Matteo Ploner, 2014. "When do the Expectations of Others Matter? An Experiment on Distributional Justice and Guilt Aversion," CEEL Working Papers 1403, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  11. Pierpaolo Battigalli & Gary Charness & Martin Dufwenberg, 2012. "Deception: The Role of Guilt," Working Papers 457, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  12. Regner, Tobias & Riener, Gerhard, 2012. "Motivational cherry picking," DICE Discussion Papers 68, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  13. Bracht, Jürgen & Regner, Tobias, 2013. "Moral emotions and partnership," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 313-326.
  14. Masahiro Shoji, 2014. "Channels of Peer Effects and Guilt Aversion in Crime: Experimental and Empirical Evidence from Bangladesh," CIRJE F-Series CIRJE-F-923, CIRJE, Faculty of Economics, University of Tokyo.

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