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Heterogeneous Social Preferences

Recent research has shown the usefulness of social preferences for explaining behavior in laboratory experiments. This paper demonstrates that models of social preferences are particularly powerful in explaining behavior if they are embedded in a setting of heteroge-neous actors with heterogeneous (social) preferences. For this purpose a simple model is in-troduced that combines the basic ideas of inequity aversion, social welfare preferences, recip-rocity and heterogeneity. This model is applied to 43 games and it can be shown that its pre-dictive accuracy is clearly higher than that of the isolated approaches. Furthermore, it can explain most of the "anomalies" (the "contradictions") that are discussed in Goeree and Holt (2001).

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File URL: http://www.wiwi.tu-clausthal.de/fileadmin/Volkswirtschaftslehre/RePEc/pdf/HSP_V2.pdf
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Paper provided by Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal) in its series TUC Working Papers in Economics with number 0001.

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Length: 29 pages
Date of creation: Apr 2003
Date of revision: Jun 2004
Handle: RePEc:tuc:tucewp:0001
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  1. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
  2. Fehr, Ernst & Schmidt, Klaus M., 2000. "Fairness, incentives, and contractual choices," Munich Reprints in Economics 20659, University of Munich, Department of Economics.
  3. Margin Dufwenberg & Georg Kirchsteiger, 2001. "A Theory of Sequential Reciprocity," Levine's Working Paper Archive 563824000000000090, David K. Levine.
  4. Drew Fudenberg & David K. Levine, 1998. "The Theory of Learning in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061945.
  5. Jacob K. Goeree & Charles A. Holt, 2001. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," American Economic Review, American Economic Association, vol. 91(5), pages 1402-1422, December.
  6. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
  7. Fehr, Ernst & Kremhelmer, Susanne & Schmidt, Klaus M., 2005. "Fairness and the Optimal Allocation of Ownership Rights," Discussion Papers in Economics 727, University of Munich, Department of Economics.
  8. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
  9. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  10. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
  11. Drew Fudenberg & David K. Levine, 1998. "Learning in Games," Levine's Working Paper Archive 2222, David K. Levine.
  12. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  13. Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 2002. "The Logit Equilibrium: A Perspective on Intuitive Behavioral Anomalies," Southern Economic Journal, Southern Economic Association, vol. 69(1), pages 21-47, July.
  14. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215.
  15. John Kagel & Katherine Wolfe, 2001. "Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game," Experimental Economics, Springer, vol. 4(3), pages 203-219, December.
  16. Gary E Bolton & Axel Ockenfels, 1997. "A Theory of Equity, Reciprocity, and Competition," Levine's Working Paper Archive 1889, David K. Levine.
  17. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer, vol. 1(1), pages 9-41, June.
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