Hierarchical Bayesian Analysis of Biased Beliefs and Distributional Other-Regarding Preferences

Journal article

This study investigates the relationship between an actor’s beliefs about others’ other-regarding (social) preferences and her own other-regarding preferences, using an “avant-garde” hierarchical Bayesian method. We estimate two distributional other-regarding preference parameters, α and β, of actors using incentivized choice data in binary Dictator Games. Simultaneously, we estimate the distribution of actors’ beliefs about others α and β, conditional on actors’ own α and β, with incentivized belief elicitation. We demonstrate the benefits of the Bayesian method compared to it’s hierarchical frequentist counterparts. Results show a positive association between an actor’s own (α; β ) and her beliefs about average(α; β) in the population. The association between own preferences and the variance in beliefs about others’ preferences in the population, however, is curvilinear for α and insignificant for β. These results are partially consistent with the cone effect [1,2] which is described in detail below. Because in the Bayesian-Nash equilibrium concept, beliefs and own preferences are assumed to be independent, these results cast doubt on the application of the Bayesian-Nash equilibrium concept to experimental data

Authors: Aksoy, O; Weesie, J

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: MDPI
• Journal: Games
• Volume: 4
• Issue: 1
• Pages: 66-88
• Publication date: 2013-02-19
• DOI: 10.3390/g4010066
• EISSN: 2073-4336
• ISSN: 2073-4336
• Language: English