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Higher-order beliefs in a Sequential Social Dilemma

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  • Anujit Chakraborty
  • Evan Calford

    (Department of Economics, University of California Davis)

Abstract

Do experimental subjects have consistent first and higher-order beliefs about others? How does any inconsistency affect strategic decisions? We introduce a simple four-player sequential social dilemma where actions reveal first and higher-order beliefs. The unique sub-game perfect Nash equilibrium (SPNE) is observed less than 5% of the time, even though our diagnostic treatments show that a majority of our subjects are self-interested, higher-order rational and have accurate first-order beliefs. In our data, strategic play deviates substantially from Nash predictions because first-order and higher-order beliefs are inconsistent for most subjects. We construct and operationalize an epistemic model of belief hierarchies to estimate that less than 10% of subjects have consistent first and higher-order beliefs.

Suggested Citation

  • Anujit Chakraborty & Evan Calford, 2023. "Higher-order beliefs in a Sequential Social Dilemma," Working Papers 356, University of California, Davis, Department of Economics.
    • Handle: RePEc:cda:wpaper:356
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    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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