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Revealed Preferences in a Sequential Prisoners' Dilemma: A Horse-Race Between Six Utility Functions

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Listed:
  • Topi Miettinen
  • Michael Kosfeld
  • Ernst Fehr
  • Jörgen W. Weibull

Abstract

We experimentally investigate behavior and beliefs in a sequential prisoner’s dilemma. Each subject had to choose an action as first mover and a conditional action as second mover. All subjects also had to state their beliefs about others’ second-mover choices. Using these elicited beliefs, we apply the transparent Selten-Krischker approach to compare the explanatory power of a few current models of social and moral preferences. We find clear differences in explanatory power between the preference models, both without and with control for the number of free parameters. The best-performing models explain about 80% of the observed behavior. We compare our results with those obtained from a conventional maximum-likelihood approach, and find that the results by and large agree. We also present a structural model of belief formation. We find a consensus bias–whereby subjects believe others behave like themselves–and payoff-salience driven optimism –whereby subjects overestimate the probabilities for favorable outcomes.

Suggested Citation

  • Topi Miettinen & Michael Kosfeld & Ernst Fehr & Jörgen W. Weibull, 2017. "Revealed Preferences in a Sequential Prisoners' Dilemma: A Horse-Race Between Six Utility Functions," CESifo Working Paper Series 6358, CESifo.
  • Handle: RePEc:ces:ceswps:_6358
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    References listed on IDEAS

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    Cited by:

    1. Casal, Sandro & Fallucchi, Francesco & Quercia, Simone, 2019. "The role of morals in three-player ultimatum games," Journal of Economic Psychology, Elsevier, vol. 70(C), pages 67-79.
    2. Eichenseer, Michael & Moser, Johannes, 2020. "Conditional cooperation: Type stability across games," Economics Letters, Elsevier, vol. 188(C).
    3. Essl, Andrea & Kosfeld, Michael & Kröll, Markus & Von Bieberstein, Frauke, 2018. "Sales Performance and Social Preferences," CEPR Discussion Papers 12904, C.E.P.R. Discussion Papers.
    4. Emma von Essen & Marieke Huysentruyt & Topi Miettinen, 2019. "Exploration in Teams and the Encouragement Effect: Theory and Evidence," Economics Working Papers 2019-10, Department of Economics and Business Economics, Aarhus University.
    5. Dante A. Urbina & Alberto Ruiz‐Villaverde, 2019. "A Critical Review of Homo Economicus from Five Approaches," American Journal of Economics and Sociology, Wiley Blackwell, vol. 78(1), pages 63-93, January.
    6. Eichenseer, Michael & Moser, Johannes, 2018. "Leadership in a Dynamic Public Goods Game: An Experimental Study," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181599, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    cooperation; prisoners' dilemma; other-regarding preferences; categorical imperative; consensus effect; optimism; salience;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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