Template-Type: ReDIF-Paper 1.0
Author-Name: Anujit Chakraborty
Author-Name-First: Anujit
Author-Name-Last: Chakraborty
Author-Name: Evan Calford
Author-Name-First: Evan
Author-Name-Last: Calford
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Higher-order beliefs in a Sequential Social Dilemma
Abstract: Do experimental subjects have consistent first and higher-order beliefs about others? How does any inconsistency affect strategic decisions? We introduce a simple four-player sequential social dilemma where actions reveal first and higher-order beliefs. The unique sub-game perfect Nash equilibrium (SPNE) is observed less than 5% of the time, even though our diagnostic treatments show that a majority of our subjects are self-interested, higher-order rational and have accurate first-order beliefs. In our data, strategic play deviates substantially from Nash predictions because first-order and higher-order beliefs are inconsistent for most subjects. We construct and operationalize an epistemic model of belief hierarchies to estimate that less than 10% of subjects have consistent first and higher-order beliefs.
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File-URL: https://repec.dss.ucdavis.edu/files/Fx8UwGs6SG4rdamttQsuTgaD/Higher_order_beliefs_submit_to_IER.pdf
File-Format: application/pdf
Number: 356
Classification-JEL: 
KeyWords: 
Creation-Date: 20230322
Handle: RePEc:cda:wpaper:356