Belief Error and Non-Bayesian Social Learning: An Experimental Evidence

Bogaçhan Çelen (), Sen Geng and Huihui Li
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Bogaçhan Çelen: University of Melbourne

No GRU_2018_022, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

Abstract: This paper experimentally studies whether individuals hold a first-order belief that others apply Bayes’ rule to incorporate private information into their beliefs, which is a fundamental assumption in many Bayesian and non-Bayesian social learning models. We design a novel experimental setting in which the first-order belief assumption implies that social information is equivalent to private information. Our main finding is that participants’ reported reservation prices of social information are significantly lower than those of private information, which provides evidence that casts doubt on the first-order belief assumption. We also build a novel belief error model in which participants form a random posterior belief with a Bayesian posterior belief kernel to explain the experimental findings. The structural estimation of the model suggests that participants’ sophisticated consideration of others’ belief error and their exaggeration of the error both contribute to the difference in reservation prices.

Keywords: private information; social information; belief error; non-Bayesian social learning (search for similar items in EconPapers)
JEL-codes: C91 C92 D83 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2018-10-11
New Economics Papers: this item is included in nep-exp
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https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232018-022%20Geng.pdf (application/pdf)

Related works:
Working Paper: Belief Error and Non-Bayesian Social Learning: Experimental Evidence (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2018_022

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