Trusting Your Beliefs: Understanding Beliefs and Behavior in a Trust Game

Abstract

Predictions drawn from game theoretic models of human behavior involve many assumptions about subjects’ beliefs and how those beliefs translate in to action. Despite the importance of beliefs to predicting behavior there has been little attention to understanding actual beliefs. In this paper we utilize an experimental approach to study both beliefs and behavior in a trust game. We find that in a standard trust game many people expect to benefit financially from passing money in the trust game. Subjects in the experiment are relatively good at predicting the behavior of others, often by using their own behavior as a guide. Overall, players’ beliefs and actions rarely match game theoretic expectations. By looking at both beliefs and behavior we are able to shed light on what people actually believe and do. We suggest that to improve game theory’s ability to predict behavior we must understand how people actually reason.

Keywords: trust, game theory, belief elicitation, experimental design