Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283199 
Year of Publication: 
2023
Series/Report no.: 
Working Paper No. 356
Publisher: 
University of California, Department of Economics, Davis, CA
Abstract: 
Do experimental subjects have consistent first and higher-order beliefs about others? How does any inconsistency affect strategic decisions? We introduce a simple four-player sequential social dilemma where actions reveal first and higher-order beliefs. The unique sub-game perfect Nash equilibrium (SPNE) is observed less than 5% of the time, even though our diagnostic treatments show that a majority of our subjects are self-interested, higher-order rational and have accurate first-order beliefs. In our data, strategic play deviates substantially from Nash predictions because first-order and higher-order beliefs are inconsistent for most subjects. We construct and operationalize an epistemic model of belief hierarchies to estimate that less than 10% of subjects have consistent first and higher-order beliefs.
Subjects: 
Experimental economics
Higher-order beliefs
Social dilemma
JEL: 
C92
D81
D91
Document Type: 
Working Paper

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