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First- and Second-order Subjective Expectations in Strategic Decision-Making: Experimental Evidence

Charles Manski and Claudia Neri

No 73, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: We study first- and second-order subjective expectations (beliefs) in strategic decision-making. We propose a method to 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.

Date: 2013
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-exp and nep-neu
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Citations: View citations in EconPapers (34)

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Related works:
Journal Article: First- and second-order subjective expectations in strategic decision-making: Experimental evidence (2013) Downloads
Working Paper: First- and Second-order Subjective Expectations in Strategic Decision-Making: Experimental Evidence (2012) Downloads
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