First- and Second-order Subjective Expectations in Strategic Decision-Making: Experimental Evidence
Journal
Games and Economic Behavior
ISSN
0899-8256
Type
journal article
Date Issued
2013-09
Author(s)
Abstract
We study first- and second-order subjective expectations (beliefs) in strategic decision-making. We 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.
Language
English
Keywords
decision-making
beliefs
subjective expectations
experiments
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Quantitative Economic Methods
Refereed
Yes
Publisher
Elsevier
Volume
81
Number
1
Start page
232
End page
254
Pages
23
Subject(s)
Eprints ID
210731