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Incomplete-Information Models of Guilt Aversion in the Trust Game

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  • Giuseppe Attanasi

    () (Bureau of Economic Theory and Applications, CNRS, and University of Strasbourg, 67000 Strasbourg, France)

  • Pierpaolo Battigalli

    () (Department of Decision Sciences and Innocenzo Gasparini Institute for Economic Research, Bocconi University, 20136 Milan, Italy)

  • Elena Manzoni

    () (Department of Economics, Management and Statistics, University of Milano-Bicocca, 20126 Milano, Italy)

Abstract

In 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. However, 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 needed. We take a first step in this direction, focusing on guilt aversion in the Trust Game. In our models, agents have heterogeneous belief hierarchies. We characterize equilibria where trust occurs with positive probability. Our analysis illustrates the incomplete-information approach to psychological games and can help to organize experimental results in the Trust Game. This paper was accepted by Uri Gneezy, behavioral economics.

Suggested Citation

  • Giuseppe Attanasi & Pierpaolo Battigalli & Elena Manzoni, 2016. "Incomplete-Information Models of Guilt Aversion in the Trust Game," Management Science, INFORMS, vol. 62(3), pages 648-667, March.
  • Handle: RePEc:inm:ormnsc:v:62:y:2016:i:3:p:648-667
    DOI: 10.1287/mnsc.2015.2154
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    psychological games; Trust Game; guilt; incomplete information;

    JEL classification:

    • 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

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