First- and second-order subjective expectations in strategic decision-making: Experimental evidence

Charles Manski and Claudia Neri

Games and Economic Behavior, 2013, vol. 81, issue C, 232-254

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.

Keywords: Decision-making; Beliefs; Subjective expectations; Experiments (search for similar items in EconPapers)
JEL-codes: C92 D81 D83 D84 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Working Paper: First- and Second-order Subjective Expectations in Strategic Decision-Making: Experimental Evidence (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:81:y:2013:i:c:p:232-254

DOI: 10.1016/j.geb.2013.06.001

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