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Learning about a Class of Belief-Dependent Preferences without Information on Beliefs

  • Charles Bellemare
  • Alexander Sebald

We show how to bound the effect of belief-dependent preferences on choices in sequential two-player games without information about the (higher-order) beliefs of players. The approach can be applied to a class of belief-dependent preferences which includes reciprocity (Dufwenberg and Kirchsteiger, 2004) and guilt aversion (Battigalli and Dufwenberg, 2007) as special cases. We show how the size of the bounds can be substantially reduced by exploiting a specific invariance property common to preferences in this class. We illustrate our approach by analyzing data from a large scale experiment conducted with a sample of participants randomly drawn from the Dutch population. We find that behavior of players in the experiment is consistent with significant guilt aversion: some groups of the population are willing the pay at least 0.16€ to avoid “letting down” another player by 1€. We also find that our approach produces narrow and thus very informative bounds on the effect of reciprocity in the games we consider. Our bounds suggest the model of reciprocity we consider is not a significant determinant of decisions in our experiment.

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Paper provided by CIRPEE in its series Cahiers de recherche with number 1125.

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Date of creation: 2011
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Handle: RePEc:lvl:lacicr:1125
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  1. Blanco, Mariana & Engelmann, Dirk & Koch, Alexander K. & Normann, Hans-Theo, 2014. "Preferences and beliefs in a sequential social dilemma: A within-subjects analysis," DICE Discussion Papers 145, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  2. Bellemare, Charles & Kroger, Sabine, 2007. "On representative social capital," European Economic Review, Elsevier, vol. 51(1), pages 183-202, January.
  3. Victor Chernozhukov & Sokbae Lee & Adam Rosen, 2011. "Intersection bounds: estimation and inference," CeMMAP working papers CWP34/11, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  4. Charles Bellemare & Alexander Sebald & Martin Strobel, 2011. "Measuring the willingness to pay to avoid guilt: estimation using equilibrium and stated belief models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 437-453, 04.
  5. Charles Bellemare & Luc Bissonnette & Sabine Kröger, 2010. "Bounding preference parameters under different assumptions about beliefs: a partial identification approach," Experimental Economics, Springer, vol. 13(3), pages 334-345, September.
  6. DHAENE, Geert & BOUCKAERT, Jan, 2007. "Sequential reciprocity in two-player, two-stage games: An experimental analysis," Working Papers 2007026, University of Antwerp, Faculty of Applied Economics.
  7. Bellemare, C. & Kroger, S. & van Soest, A.H.O., 2008. "Measuring inequity aversion in a heterogeneous population using experimental decisions and subjective probabilities," Other publications TiSEM f17bda32-98f9-4580-ab3f-6, Tilburg University, School of Economics and Management.
  8. Andrew Chesher, 2009. "Single equation endogenous binary reponse models," CeMMAP working papers CWP23/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  9. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May.
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