Systematic Differences in Beliefs About Others in Strategic Interactions

36 Pages Posted: 31 Mar 2013 Last revised: 29 May 2015

See all articles by A. Yesim Orhun

A. Yesim Orhun

University of Michigan, Stephen M. Ross School of Business

Date Written: July 1, 2012

Abstract

Individuals' preferences for outcomes and their expectations about other players' choices that influence the outcome govern strategic interactions. The common assumption that expectations about others are mutually consistent across players allows researchers to infer preferences from observed strategic decisions. In this paper, I show how players beliefs about other players choices systematically depart from this assumption and explain the consequences for the inference of preferences based on strategic choices. In the context of altruistic preferences, I document a relationship between an individual's preferences and his (implicit or explicit) expectations of others' actions in modified dictator games. This relationship is beyond what false consensus or a simple correlation between beliefs and preferences can account for and is consistent with a more fundamental account of projection of preferences. I study the impact of systematic belief differences on players strategic actions in a trust-dictator game. I show that preference incongruencies across different roles in a trust-dictator game are in line with preference projection. Finally, I demonstrate biases in the estimation of preferences from decisions in this strategic game under the assumption of mutually consistent beliefs.

Keywords: Beliefs, Projection, Altruism

Suggested Citation

Orhun, A. Yesim, Systematic Differences in Beliefs About Others in Strategic Interactions (July 1, 2012). Ross School of Business Paper No. 1185. Available at SSRN: https://ssrn.com/abstract=2241702 or http://dx.doi.org/10.2139/ssrn.2241702

A. Yesim Orhun (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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