Revealed preferences in a sequential prisoners' dilemma: A horse-race between six utility functions

Topi Miettinen*, Michael Kosfeld, Ernst Fehr, Jörgen Weibull

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We experimentally investigate behavior and beliefs in a sequential prisoner’s dilemma. Each subject had to choose an action as first mover and a conditional action as second mover. All subjects also had to state their beliefs about others’ second-mover choices. Using these elicited beliefs, we apply the transparent Selten–Krischker approach to compare the explanatory power of a few current models of social and moral preferences. We find clear differences in explanatory power between the preference models, both without and with control for the number of free parameters. The best-performing models explain about 80% of the observed behavior. We compare our results with those obtained from a conventional maximum-likelihood approach, and find that the results by and large agree. We also present a structural model of belief formation. We find a consensus bias—whereby subjects believe others behave like themselves—and payoff-salience driven optimism—whereby subjects overestimate the probabilities for favorable outcomes.
Original languageEnglish
Peer-reviewed scientific journalJournal of Economic Behavior and Organization
Volume173
Pages (from-to)1-25
Number of pages25
ISSN0167-2681
DOIs
Publication statusPublished - 30.03.2020
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics
  • experimental economics
  • behavioural economics
  • laboratory experiments
  • cooperation
  • prisoner's dilemma
  • other-regarding preferences
  • categorical imperative
  • consensus effect
  • optimism
  • salience

Sustainable Development Goals

  • GOAL 16: Peace and Justice Strong Institutions

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Competition economics and service strategy - Quantitative consumer behaviour and competition economics

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