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http://ssrn.com/abstract=1545136
 
 

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Beliefs and Actions in the Trust Game: Creating Instrumental Variables to Estimate the Causal Effect


Miguel A. Costa-Gomes


University of Aberdeen Business School

Steffen Huck


University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)

Georg Weizsacker


Humboldt University Berlin; DIW Berlin


IZA Discussion Paper No. 4709

Abstract:     
In many economic contexts, an elusive variable of interest is the agent's expectation about relevant events, e.g. about other agents' behavior. Recent experimental studies as well as surveys have asked participants to state their beliefs explicitly, but little is known about the causal relation between beliefs and other behavioral variables. This paper discusses the possibility of creating exogenous instrumental variables for belief statements, by shifting the probabilities of the relevant events. We conduct trust game experiments where the amount sent back by the second player (trustee) is exogenously varied by a random process, in a way that informs only the first player (trustor) about the realized variation. The procedure allows detecting causal links from beliefs to actions under plausible assumptions. The IV estimates indicate a significant causal effect, comparable to the connection between beliefs and actions that is suggested by OLS analyses.

Number of Pages in PDF File: 44

Keywords: social capital, trust game, instrumental variables, belief elicitation

JEL Classification: C72, C81, C91, D84

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Date posted: February 1, 2010  

Suggested Citation

Costa-Gomes, Miguel A. and Huck, Steffen and Weizsacker, Georg, Beliefs and Actions in the Trust Game: Creating Instrumental Variables to Estimate the Causal Effect. IZA Discussion Paper No. 4709. Available at SSRN: http://ssrn.com/abstract=1545136

Contact Information

Miguel A. Costa-Gomes (Contact Author)
University of Aberdeen Business School ( email )
Dunbar Street
Aberdeen AB24 3QY, Scotland AB24 3QY
United Kingdom
Steffen Huck
University College London - Department of Economics ( email )
Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 207 679 5895 (Phone)
+44 207 916 2774 (Fax)
HOME PAGE: http://www.ucl.ac.uk/~uctpshu/
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Georg Weizsacker
Humboldt University Berlin ( email )
Spandauer Str. 1
Berlin, D-10099
Germany
DIW Berlin
Mohrenstr. 58
Berlin
Germany
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