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

  • Bellemare, Charles

    ()

    (Université Laval)

  • Kröger, Sabine

    ()

    (Université Laval)

  • van Soest, Arthur

    ()

    (Tilburg University)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1666.

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Length: 50 pages
Date of creation: Jul 2005
Date of revision:
Publication status: published as ' Measuring Inequity Aversion in a Heterogeneous Population using Experimental Decisions and Subjective Probabilities' in: Econometrica, 2008, 76 (4), 815-839
Handle: RePEc:iza:izadps:dp1666
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  1. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  2. 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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  4. 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.
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  10. 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.
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  12. 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.
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