Nonparametric utility theory in strategic settings: Revealing preferences and beliefs from proposal–response games

We explore the conditions under which behavior in a strategic setting can be rationalized as the best response to some belief about other players' behavior. We show that a restriction on preferences, which we term quasi-monotonicity, provides such a test for a family of ultimatum games. Prefere...

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Bibliographic Details
Published inGames and economic behavior Vol. 115; pp. 60 - 82
Main Authors Castillo, Marco E., Cross, Philip J., Freer, Mikhail
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.05.2019
Subjects
Beliefs
Noncooperative games
Rationality
Noncooperative games
C78
Rationality
Beliefs
C92
C72
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Summary:We explore the conditions under which behavior in a strategic setting can be rationalized as the best response to some belief about other players' behavior. We show that a restriction on preferences, which we term quasi-monotonicity, provides such a test for a family of ultimatum games. Preferences are quasi-monotone if an agent prefers an allocation that improves her payoff at least as much as that of others. In an experiment, we find that 94% of the proposers make choices that are arbitrarily close to quasi-monotone preferences and beliefs. We also find that 90% of the responders make inconsistent choices in no more than 5% of the decision problems. Subjects whose choices are consistent as proposers are also more likely to make consistent choices as responders and to believe that others act consistently. Finally, we find little support for the convexity of preferences.
ISSN:0899-8256
1090-2473
DOI:10.1016/j.geb.2019.02.010