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Actions and Beliefs: Estimating Distribution-Based Preferences Using a Large Scale Experiment with Probability Questions on Expectations

  • Charles Bellemare
  • Sabine Kröger
  • Arthur van Soest

We combine the choice data of proposers and responders in the ultimatum game, their expectations elicited in the form of subjective probability questions, and the choice data of proposers (dictators) in a dictator game to estimate a structural model of decision making under uncertainty. We use a large and representative sample of subjects drawn from the Dutch population. Our results indicate that there is considerable heterogeneity in preferences for equity in the population. Changes in preferences have an important impact on decisions of dictators in the dictator game and responders in the ultimatum game, but a smaller impact on decisions of proposers in the ultimatum game, a result due to proposer's subjective expectations about responders' decisions. The model which uses subjective data on expectations has better predictive power and lower noise level than a model which assumes that players have rational expectations. Afin de déceler un modèle structurel de prise de décision dans l'incertitude, nous combinons les données recueillies par i) les choix des deux types de joueurs dans le jeu de l'ultimatum (ceux qui proposent et ceux qui répondent), ii) leurs attentes obtenues sous la forme de questions à probabilité subjective, et iii) les choix des dictateurs (premiers joueurs) dans le jeu du dictateur. Nous utilisons un large échantillon représentatif des sujets dans la population néerlandaise. Nos résultats indiquent une hétérogénéité considérable dans la population sur les préférences en matière d'équité. La diversité de ces préférences a un impact important sur les décisions des dictateurs dans le jeu du dictateur, et sur les répondeurs dans le jeu de l'ultimatum, mais un impact plutôt moindre sur les décisions des joueurs qui proposent dans le jeu de l'ultimatum. Cette dernière observation est due aux attentes subjectives de ces joueurs face aux décisions des répondeurs. Le modèle qui utilise des données subjectives sur les attentes des joueurs prévoit mieux les choix des sujets et réduit plus le bruit qu'un modèle qui suppose que les joueurs ont des attentes rationnelles.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2006s-16.

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Length: 50 pages
Date of creation: 01 Sep 2006
Date of revision:
Handle: RePEc:cir:cirwor:2006s-16
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  1. Andreas Ortmann & John Fitzgerald & Carl Boeing, 2000. "Trust, Reciprocity, and Social History: A Re-examination," Experimental Economics, Springer, vol. 3(1), pages 81-100, June.
  2. Huck, Steffen & Müller, Wieland & Normann, Hans-Theo, 1999. "Stackelberg beats Cournot: On collusion and efficiency in experimental markets," SFB 373 Discussion Papers 1999,32, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  3. Bellemare, Charles & Kröger, Sabine, 2004. "On Representative Social Capital," IZA Discussion Papers 1145, Institute for the Study of Labor (IZA).
  4. Oxoby, Robert J. & McLeish, Kendra N., 2004. "Sequential decision and strategy vector methods in ultimatum bargaining: evidence on the strength of other-regarding behavior," Economics Letters, Elsevier, vol. 84(3), pages 399-405, September.
  5. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2001. "Estimating Individual Discount Rates in Denmark: A Field Experiment," NCEE Working Paper Series 200102, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2001.
  6. Heike Hennig-Schmidt & Zhu-Yu Li & Chaoliang Yang, 2004. "Why People Reject Advantageous Offers – Non-monotone Strategies in Ultimatum Bargaining," Bonn Econ Discussion Papers bgse22_2004, University of Bonn, Germany.
  7. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
  8. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  9. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  10. Jeffrey Carpenter & Eric Verhoogen & Stephen Burks, 2003. "The Effect of Stakes in Distribution Experiments," Middlebury College Working Paper Series 03-28, Middlebury College, Department of Economics.
  11. repec:dgr:kubcen:200457 is not listed on IDEAS
  12. Goeree, Jacob K. & Holt, Charles A., 2000. "Asymmetric inequality aversion and noisy behavior in alternating-offer bargaining games," European Economic Review, Elsevier, vol. 44(4-6), pages 1079-1089, May.
  13. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2.
  14. Manski, Charles F., 2002. "Identification of decision rules in experiments on simple games of proposal and response," European Economic Review, Elsevier, vol. 46(4-5), pages 880-891, May.
  15. repec:dgr:kubcen:200347 is not listed on IDEAS
  16. Blount, Sally, 1995. "When Social Outcomes Aren't Fair: The Effect of Causal Attributions on Preferences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(2), pages 131-144, August.
  17. Bellemare, Charles & Kröger, Sabine, 2003. "On Representative Trust," SFB 373 Discussion Papers 2003,27, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  18. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
  19. Yaw Nyarko & Andrew Schotter, 2002. "An Experimental Study of Belief Learning Using Elicited Beliefs," Econometrica, Econometric Society, vol. 70(3), pages 971-1005, May.
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