Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/31760 
Year of Publication: 
2009
Series/Report no.: 
Jena Economic Research Papers No. 2009,043
Publisher: 
Friedrich Schiller University Jena and Max Planck Institute of Economics, Jena
Abstract: 
We study two person-betting games with inconsistent commonly know beliefs, using an experimental approach. In our experimental games, participants bet against one another, each bettor choosing one of two possible outcomes, and payoff odds are know at the time bets are placed. Bettors’ beliefs are always commonly known. Participants play a series of betting games, in some of which the occurrence probabilities of the two outcomes differ between bettors (inconsistent beliefs) while in others the same occurrence probabilities prevail for both bettors (consistent beliefs). In the betting games with consistent commonly know beliefs, we observe that participants refrain from betting. In the betting games with inconsistent commonly know beliefs, we observe significant betting rates and the larger the discrepancy between the two bettors’ subjective expectations the larger the volume of bets. Our experimental results contrast with the existing evidence on zero-sum betting games according to which participants’ irrational inclination to bet is difficult to eliminate.
Subjects: 
Betting
Common prior
Harsanyi consistency
Experimental Economics.
JEL: 
C72
C92
D84
Document Type: 
Working Paper

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