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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. Jacob K Goeree & Charles A Holt, 2004. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," Levine's Working Paper Archive 618897000000000900, David K. Levine.
  2. Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1999. "The Logit Equilibrium: A Perspective on Intuitive Behavioral Anomalies," Virginia Economics Online Papers 332, University of Virginia, Department of Economics.
  3. Engelmann Dirk & Strobel Martin, 2002. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," Research Memorandum 015, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  4. 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.
  5. Ernst Fehr & Susanne Kremhelmer & Klaus Schmidt, 2005. "Fairness and the Optimal Allocation of Ownership Rights," CESifo Working Paper Series 1467, CESifo Group Munich.
  6. Gary E Bolton & Axel Ockenfels, 1997. "A Theory of Equity, Reciprocity, and Competition," Levine's Working Paper Archive 1889, David K. Levine.
  7. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  8. Dufwenberg, M. & Kirchsteiger, G., 1998. "A Theory of Sequential Reciprocity," Discussion Paper 1998-37, Tilburg University, Center for Economic Research.
  9. Drew Fudenberg & David K. Levine, 1998. "The Theory of Learning in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061945, March.
  10. 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.
  11. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
  12. 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.
  13. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, March.
  14. Ernst Fehr & Klaus M. Schmidt, . "Fairness, Incentives, and Contractual Choices," IEW - Working Papers 020, Institute for Empirical Research in Economics - University of Zurich.
  15. John Kagel & Katherine Wolfe, 2001. "Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game," Experimental Economics, Springer;Economic Science Association, vol. 4(3), pages 203-219, December.
  16. 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.
  17. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 9-41, June.
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