Inconsistent Incomplete Information: A Betting Experiment

Werner Güth (), Loreto Llorente Erviti () and Anthony Ziegelmeyer
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Loreto Llorente Erviti: Universidad Publica de Navarra, Pamplona

No 2009-043, Jena Economics Research Papers from Friedrich-Schiller-University 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.

Keywords: Betting; Common prior; Harsanyi consistency; Experimental Economics. (search for similar items in EconPapers)
JEL-codes: C72 C92 D84 (search for similar items in EconPapers)
Date: 2009-06-11
New Economics Papers: this item is included in nep-exp, nep-gth and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:jrp:jrpwrp:2009-043

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