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

ICS/Department of Sociology, Faculty of Social Sciences, Utrecht University, Padualaan 14, 3584 CH, The Netherlands
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Games 2013, 4(1), 66-88; https://doi.org/10.3390/g4010066
Received: 22 November 2012 / Revised: 28 January 2013 / Accepted: 29 January 2013 / Published: 19 February 2013
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. View Full-Text
Keywords: Bayesian statistics; Dictator Game; other-regarding preferences; beliefs Bayesian statistics; Dictator Game; other-regarding preferences; beliefs
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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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