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Indirect higher order beliefs and cooperation

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  • Jiabin Wu

    (University of Oregon)

Abstract

This study experimentally examines the role of indirect higher order beliefs in sequential psychological games. We consider a three-player sequential game in which the first and third players do not interact sequentially, but only through an intermediary, the second player. We posit that the third player’s decision to cooperate depends on his indirect higher order belief, namely, his belief about what the first player believes the second player would choose. We employ pre-play communication between the first and third players as a way to influence the third player’s indirect higher order belief. The evidence demonstrates that communication can effectively induce cooperation from the third player by shaping his indirect higher order belief.

Suggested Citation

  • Jiabin Wu, 2018. "Indirect higher order beliefs and cooperation," Experimental Economics, Springer;Economic Science Association, vol. 21(4), pages 858-876, December.
    • Handle: RePEc:kap:expeco:v:21:y:2018:i:4:d:10.1007_s10683-017-9555-y
    DOI: 10.1007/s10683-017-9555-y
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    2. Jiang, Lianjie & Wu, Jiabin, 2019. "Belief-updating rule and sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 113(C), pages 770-780.

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    More about this item

    Keywords

    Indirect higher order beliefs; Psychological game theory; Sequential reciprocity; Communication; Behavioral economics; Experimental economics;
    All these keywords.

    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
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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