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Hierarchical Bayesian Analysis of Biased Beliefs and Distributional Other-Regarding Preferences

  • Ozan Aksoy

    ()

    (ICS/Department of Sociology, Faculty of Social Sciences, Utrecht University, Padualaan 14, 3584 CH, The Netherlands)

  • Jeroen Weesie

    ()

    (ICS/Department of Sociology, Faculty of Social Sciences, Utrecht University, Padualaan 14, 3584 CH, The Netherlands)

Registered author(s):

    This study investigates the relationship between an actor’s beliefs about others’ other-regarding (social) preferences and her own other-regarding preferences, using an “avant-garde” hierarchical Bayesian method. We estimate two distributional other-regarding preference parameters, α and β, of actors using incentivized choice data in binary Dictator Games. Simultaneously, we estimate the distribution of actors’ beliefs about others α and β, conditional on actors’ own α and β, with incentivized belief elicitation. We demonstrate the benefits of the Bayesian method compared to it’s hierarchical frequentist counterparts. Results show a positive association between an actor’s own (α; β ) and her beliefs about average (α; β) in the population. The association between own preferences and the varianc e in beliefs about others’ preferences in the population, however, is curvilinear for α and insignificant for β. These results are partially consistent with the cone effect [1,2] which is described in detail below. Because in the Bayesian-Nash equilibrium concept, beliefs and own preferences are assumed to be independent, these results cast doubt on the application of the Bayesian-Nash equilibrium concept to experimental data.

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    Article provided by MDPI, Open Access Journal in its journal Games.

    Volume (Year): 4 (2013)
    Issue (Month): 1 (February)
    Pages: 66-88

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    Handle: RePEc:gam:jgames:v:4:y:2013:i:1:p:66-88:d:23657
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