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Games 2013, 4(1), 66-88; doi:10.3390/g4010066
Article

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

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Received: 22 November 2012 / Revised: 28 January 2013 / Accepted: 29 January 2013 / Published: 19 February 2013
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Abstract

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.
Keywords: Bayesian statistics; Dictator Game; other-regarding preferences; beliefs Bayesian statistics; Dictator Game; other-regarding preferences; beliefs
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Aksoy, O.; Weesie, J. Hierarchical Bayesian Analysis of Biased Beliefs and Distributional Other-Regarding Preferences. Games 2013, 4, 66-88.

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