Testing psychological forward induction and the updating of beliefs in the lost wallet game

Daniel Woods and Maroš Servátka

Journal of Economic Psychology, 2016, vol. 56, issue C, 116-125

Abstract: This paper studies psychological forward induction and the updating of beliefs in the lost wallet game (Dufwenberg & Gneezy, 2000), which is required to derive a prediction for guilt averse agents. Our experiment tests whether the second movers psychologically induct forward and update their beliefs after observing their paired first mover's decision by eliciting beliefs with different second mover knowledge of first mover decision, depending on treatment. We find that second movers do update their beliefs conditional on receiving information on the first mover’s action, supporting psychological forward induction.

Keywords: Beliefs; Experiment; Guilt aversion; Lost wallet game; Psychological forward induction; Updating (search for similar items in EconPapers)
JEL-codes: C70 C91 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: Testing Psychological Forward Induction and the Updating of Beliefs in the Lost Wallet Game (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:56:y:2016:i:c:p:116-125

DOI: 10.1016/j.joep.2016.06.006

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