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If I Don’t Trust Your Preferences, I Won’t Follow Mine: Preference Stability, Beliefs, and Strategic Choice

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  • Irenaeus Wolff

Abstract

In contrast to standard theory, experimental participants often do not best-respond to their stated beliefs. Potential reasons are inaccurate belief reports or unstable preferences. Focusing on games in which participants can observe the revealed preferences of their opponents, this paper points out an additional reason for the lack of belief-action consistency. Whether a participant’s best-response—or a Nash-equilibrium—predicts her behaviour depends heavily on the participant believing in others’ preference stability. Believing in others’ preference stability fosters predictability because it is associated with a lower variance in the participant’s belief about her opponents’ actions, and low-variance beliefs entail more best-responding.

Suggested Citation

  • Irenaeus Wolff, 2018. "If I Don’t Trust Your Preferences, I Won’t Follow Mine: Preference Stability, Beliefs, and Strategic Choice," TWI Research Paper Series 113, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  • Handle: RePEc:twi:respas:0113
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    File URL: https://www.twi-kreuzlingen.ch/wp-content/uploads/2018/10/twi-rps-113-wolff.pdf
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    1. Irenaeus Wolff & Dominik Bauer, 2018. "Elusive Beliefs: Why Uncertainty Leads to Stochastic Choice and Errors," TWI Research Paper Series 111, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
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    Keywords

    Preference stability; best-response; Nash-equilibrium; rational beliefs; public good; social dilemma; conditional cooperation; social preferences.;

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