nep-neu New Economics Papers
on Neuroeconomics
Issue of 2013‒08‒23
two papers chosen by
Daniel Houser
George Mason University

  1. First- and Second-order Subjective Expectations in Strategic Decision-Making: Experimental Evidence By Charles Manski; Claudia Neri
  2. Social Centipedes: the Role of Group Identity on Preferences and Reasoning By James Tremewan; Chloé Le Coq; Alexander D. Wagner

  1. By: Charles Manski (Northwestern University); Claudia Neri (University of St.Gallen)
    Abstract: We study first- and second-order subjective expectations (beliefs) in strategic decision-making. We propose a method to elicit probabilistically both first- and second-order beliefs and apply the method to a Hide-and-Seek experiment. We study the relationship between choice and beliefs in terms of whether observed choice coincides with the optimal action given elicited beliefs. We study the relationship between first- and second-order beliefs under a coherence criterion. Weak coherence requires that if an event is assigned, according to first-order beliefs, a probability higher/lower/equal to the one assigned to another event, then the same holds according to second-order beliefs. Strong coherence requires the probability assigned according to first- and second-order beliefs to coincide. Evidence of heterogeneity across participants is reported. Verbal comments collected at the end of the experiment shed light on how subjects think and decide in a complex environment that is strategic, dynamic and populated by potentially heterogeneous individuals.
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:red:sed013:73&r=neu
  2. By: James Tremewan; Chloé Le Coq; Alexander D. Wagner
    Abstract: Using a group identity manipulation we examine the role of social preferences in an experimental one-shot centipede game. Contrary to what social preference theory would predict, we fnd that players continue longer when playing with outgroup members. The explanation we provide for this result rests on two observations: (i) players should only stop if they are suffciently conident that their partner will stop at the next node, given the exponentially-increasing payoffs in the game, and (ii) players are more likely to have this degree of certainty if they are matched with someone from the same group, whom they view as similar to themselves and thus predictable. We find strong statistical support for this argument. We conclude that group identity not only impacts a player's utility function, as identifed in earlier research, but also affects her reasoning about her partner's behavior.
    JEL: C72 C91 C92 D83
    Date: 2013–08
    URL: http://d.repec.org/n?u=RePEc:vie:viennp:1305&r=neu

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