Stated beliefs versus inferred beliefs: A methodological inquiry and experimental test

Belief elicitation in game experiments may be problematic if it changes game play. We experimentally verify that belief elicitation can alter paths of play in a two-player repeated asymmetric matching pennies game. Importantly, this effect occurs only during early periods and only for players with strongly asymmetric payoffs, consistent with a cognitive/affective effect on priors that may serve as a substitute for experience. These effects occur with a common scoring rule elicitation procedure, but not with simpler (unmotivated) statements of expected choices of opponents. Scoring rule belief elicitation improves the goodness of fit of structural models of belief learning, and prior beliefs implied by such models are both stronger and more realistic when beliefs are elicited than when they are not. We also find that “inferred beliefs” (beliefs estimated from past observed actions of opponents) can predict observed actions better than the “stated beliefs” from scoring rule belief elicitation.     

Mindreading and endogenous beliefs in games

We argue that a Bayesian explanation of strategic choices in games requires introducing a psychological theory of belief formation. We highlight that beliefs in epistemic game theory are derived from the actual choice of the players, and cannot therefore explain why Bayesian rational players should play the strategy they actually chose. We introduce the players’ capacity of mindreading in a game theoretical framework with the simulation theory, and characterise the beliefs that Bayes rational players could endogenously form in games. We show in particular that those beliefs need not be ratifiable, and therefore that rational players can form action-dependent beliefs.     

Stock price impact of diversity in investor beliefs

I re-examine the association between diverse investor beliefs and stock prices within the context of an imperfect competition model. The relationship is ambiguous because of several different effects of a change in diversity in investor beliefs. This has implications for empirical design and explains why 40 years of evidence on this association is inconclusive.     

On social norms and beliefs: A model of manager environmental behavior

A prevailing view in the literature states that social sanctions can support, in equilibrium, high levels of obedience to a costly norm. The reason is that social disapproval and stigmatization faced by the disobedient are highest when disobedience is the exception rather than the rule in society. In contrast, the Bayesian model introduced here shows that, imperfect information causes the expected social sanction to be lowest precisely when obedience is more common. This, amongst other findings, draws a distinct line between social and moral norms, both of which may depend on others’ behavior but not on action observability. The implications of the use of non-Bayesian belief formation rules by society, namely a representativeness rule (overweighting the signals) and conservativism (overweighting the prior), for payoff functions and equilibria are explored.     

The effect of heterogeneous beliefs on mergers and acquisitions

This article investigates the effect of heterogeneous beliefs on firms’ mergers and acquisitions (M&A) decisions. Using data of China’s financial market, which is featured with great heterogeneity of belief, we find that heterogeneous beliefs are positively associated with the occurrence of M&A transactions, and firms with greater heterogeneous beliefs are more likely to pay the transactions with stock. Moreover, we show that government intervention, measured by state ownership, weakens the effect of heterogeneous beliefs on firms’ M&A decisions.     

Asset price volatility and trading volume with rational beliefs

Summary. This paper develops a model of speculative trading in a large economy with a continuum of investors. In our model the investors are assumed to have diverse beliefs which are rational in the sense of being compatible with observed data. We demonstrate the existence of price amplification effects and show that the equilibrium prices can be higher or lower than the rational expectation equilibrium price. It is also shown that trading volume is positively related to the directions of price changes. Moreover, we study how asset price volatility and trading volume are influenced by belief structures, short selling constraints and the amount of fund available for investment.Received: 23 January 2003, Revised: 30 April 2003, JEL Classification Numbers: D84, G12.We are grateful to Professors Mordecai Kurz, Kenneth Arrow, Kenneth Judd, Carsten Nielsen, Maurizio Motolese, Mark Garmaise, Jean-Michel Grandmont, Peter Hammond, Karl Shell, Jan Werner and participants of the Society for the Advancement of Economic Theory (SAET) Conference and Stanford Institute of Theoretical Economics (SITE) Conference for many helpful suggestions. Correspondence to: H.-M. Wu     

Sunspots and self-fulfilling beliefs in the U.S. housing market

This paper provides a rational expectations equilibrium framework to organize the following observations about the U.S. housing market from 1975 to 2007: (i) housing occupancy patterns were approximately constant, (ii) rents were stable, and (iii) house prices appreciated considerably in the late 1990s. I develop a model based on search and matching theory and close it by specifying a state of household confidence that is assumed to take one of two sunspot-driven values: normal or exuberant. The model generates a substantial increase in house prices and stable rents as the probability of the exuberant state increases, driven by self-fulfilling beliefs. I explore which aspects of the parameterization are important for generating a large appreciation in house prices in the model.     

Speculative trading with rational beliefs and endogenous uncertainty

Summary. This paper introduces the framework of rational beliefs of Kurz (1994), which makes the assumptions of heterogeneous beliefs of Harrison and Kreps (1978) and Morris (1996) more plausible. Agents hold diverse beliefs that are “rational” in the sense of being compatible with ample observed data. In a non-stationary environment the agents only learn about the stationary measure of observed data, but their beliefs can remain non-stationary and diverse. Speculative trading then stems from disagreements among traders. In a Markovian framework of dividends and beliefs, we obtain analytical results to show how the speculative premium depends on the extent of heterogeneity of beliefs. In addition, we demonstrate that there exists a unique Rational Belief Equilibrium (RBE) generically with endogenous uncertainty (as defined by Kurz and Wu, 1996) and that the RBE price is higher than the rational expectation equilibrium price (REE) under some general conditions Received: March 15, 2001; revised version: April 26, 2002 RID="*" ID="*" We are deeply grateful to Mordecai Kurz for his constant encouragement and inspiring guidance over the years. We wish to express our gratitude to an anonymous referee for the very valuable comments provided. We also thank Kenneth Arrow, Peter Hammond, Roko Aliprantis and Nicholas Yannelis for their helpful suggestions and Academia Sinica and the National Science Council of the R.O.C. for their indispensable support. Correspondence to: H.-M. Wu     

How beliefs influence behaviour: Confucianism and innovation in China

Previous studies have analysed how religious beliefs may affect economic activity. We extend this literature by examining how Confucianism is linked to innovation activity at the firm level in China. We analyse the relationship between Confucianism and several proxies for input and outputs of innovation activities. Our results show that Confucianism is significantly related to lower levels of innovation activity regardless of which measure for firm-level innovation we use. We also find that the nature of ultimate ownership influences this relationship, with innovation among state-controlled firms being significantly more affected by Confucianism. This study thus adds to the understanding of how traditional belief systems influence behaviour among economic actors.     

投资组合管理公司排名竞争动态博弈分析

构建投资组合管理人在隐性激励下对投资组合风险控制过程的动态博弈模型，并通过这个模型推导投资组合管理人在考评期内最优策略的选择以及策略转换的条件，证明排名领先的投资组合管理人更愿意采取低风险策略并保持这个策略直到考评期结束或者其排名领先丧失，而排名落后的投资组合管理人更愿意采取高风险策略。     

Learning,non-equilibrium beliefs,and non-pecuniary payoffs in an experimental game

Summary. We present a parametric learning model of players' dynamic and possibly out-of-equilibrium beliefs about other players' preferences that also incorporates random utility (noise). We estimate the model using the data from the four-country ultimatum game experiments of Roth et al. (1991). We find evidence that in the US and in Israel, the estimated beliefs of proposers are stationary and out-of-equilibrium, that in Slovenia, they are in equilibrium, and that in Japan, they are out-of-equilibrium, change from period to period and move away from equilibrium over time. In Japan and in the US, the estimated proposers' beliefs are further away from the uniform prior than the estimated equilibrium beliefs. The results seem to provide support for a non-pecuniary payoff explanation in all countries. Received: May 16, 2000; revised version: December 15, 2001 RID="*" ID="*" We thank Alvin Roth for providing us with the data sets of Roth, Prasnikar, Okuno-Fujiwara, and Zamir (1991). We are very grateful to Vincent Crawford, Joel Sobel, and an anonymous referee for all their comments and feedback. We are also grateful to J?rg Borrmann, Bruno Broseta, Jimmy Chan, Liran Einav, Bernd Engelmann, Drew Fudenberg, Oscar Jorda, Muriel Niederle, Pedro Pereira, Georg Weizs?cker, and audiences at the California Institute of Technology, Harvard University, Universidade Nova de Lisboa, University of Nevada, Las Vegas, and at the European Summer Meetings of the Econometric Society in Lausanne for their comments. Costa-Gomes was affiliated with the Harvard Business School during part of his work on this project. The usual disclaimer applies. Correspondence to:M.A. Costa-Gomes and K.G. Zauner     

异质信念、通货幻觉和我国房地产价格泡沫

房地产基本价值是由其未来的现金流(即租金)和贴现率决定的,异质信念与通胀幻觉分别从投资者对房地产未来现金流分布的信念差异和对贴现率的估计偏差两方面解释了房地产价格泡沫的形成机制。本文基于1994~2010年中国房地产市场季度数据,利用时变现值模型估计中国房地产市场的基本价值,进而给出房地产价格泡沫,并检验中国房地产价格泡沫的形成机制。研究发现,异质信念和通胀幻觉都勾勒出了中国房地产价格泡沫形成的画面,但相对于通胀幻觉,异质信念是中国房地产价格泡沫形成的主导因素。     

Consistency of beliefs and epistemic conditions for Nash and correlated equilibria

A consistency condition (action-consistency) on the interim beliefs of players in a game is introduced. Action-consistency is weaker than common priors and, unlike common priors, is characterized by a “no-bets” condition on verifiable events. Using action-consistency, we provide epistemic conditions to Nash and correlated equilibria weakening the common knowledge restrictions in Aumann and Brandenburger [Aumann, R., Brandenburger, A., 1995. Epistemic conditions for Nash equilibrium. Econometrica 63, 1161–1180] and Aumann [Aumann, R., 1987. Correlated equilibrium as an expression of Bayesian rationality. Econometrica 55, 1–18].     

Equilibrium play and best response to (stated) beliefs in normal form games

We report experimental results on a series of ten one-shot two-person 3×3 normal form games with unique equilibrium in pure strategies played by non-economists. In contrast to previous experiments in which game theory predictions fail dramatically, a majority of actions taken coincided with the equilibrium prediction (70.2%) and were best-responses to subjects' stated beliefs (67.2%). In constant-sum games, 78% of actions taken were predicted by the equilibrium model, outperforming simple K-level reasoning models. We discuss how non-trivial game characteristics related to risk aversion, efficiency concerns and social preferences may affect the predictive value of different models in simple normal form games.     

Heterogeneous beliefs, price dispersion, and welfare-improving price controls

Summary. We consider a search market model where agents have heterogeneous beliefs about the distribution of prices. A suggestive example shows that Jevon's Law of One Price and standard welfare results are not robust to small heterogeneous errors in beliefs. In particular we show that a price ceiling above marginal cost can reduce price dispersion and improve welfare (by lowering aggregate search costs) without decreasing quantity supplied. These results are broadly consistent with the empirical evidence. Received: July 27, 1999; revised version: May 24, 2000     

Floating exchange rates versus a monetary union under rational beliefs: the role of endogenous uncertainty

Using the concept of ex-post optimality, we compare different exchange rate regimes, including floating exchange rates and fixed exchange rates with a Monetary Union in a two country OLG model with stochastic endowments. The emphasis of this comparison is on the welfare consequences of agents having incorrect beliefs. We do not assume that agents can hold any beliefs, but rather that their beliefs are rational that is consistent with the observed empirical behavior of the economy. We study a large set of possible policies, but two of them have our particular interest. The first policy implies devaluations in reaction to a negative shock, while the other implies a fixed exchange rate. These policies have very different consequences. The first will for generic beliefs not result in an ex-post optimal allocation. The other policy is on the other hand always feasible and results in an ex-post optimal allocation. When the two countries form a Monetary Union, the ex-post optimal allocation is also achieved. The meaning of “endogenous uncertainty” as an institutionally induced uncertainty is illustrated. Received: September 1, 2001; revised version: 24 June 2002 RID="*" ID="*" I would like to thank Horace W. Brock, Gianluca Cassese, Paula Orlando, Ho-Mou Wu as well as seminar participants at Copenhagen Business School, ESEM98, Keio University, Kyoto University, Osaka University, SITE (Stanford) and University of Copenhagen for many useful comments on the paper. I am also grateful to Mark J. Garmaise, Takako Fujiwara-Greve, and an anonymous referee for many helpful suggestions for improving the paper. Without the many discussions about Rational Beliefs and related issues I have had with Mordecai Kurz over the years, the research presented here would not have been possible. Financial support from The Carlsberg Foundation, Danish Social Research Council, University of Copenhagen and SITE is gratefully acknowledged.     

速度层次交流理论及其在农村剩余劳动力转移中的应用

农村剩余劳动力转移问题能否合理解决 ,不仅直接影响到中国农民收入、农民生活条件和实现农业现代化的进程 ,而且也关系到非农产业乃至整个国民经济的协调发展。在本文中作者提出了速度层次交流理论 ,并从该理论出发提出解决中国农村剩余劳动力的相关政策建议及措施。     

Expected utility inequalities: theory and applications

Suppose we know the utility function of a risk averse decision maker who values a risky prospect X at a price CE. Based on this information alone I develop upper bounds for the tails of the probabilistic belief about X of the decision maker. In the paper I also illustrate how to use these expected utility bounds in a variety of applications, which include the estimation of risk measures from observed data, option valuation, and the study of credit risk. I would like to thank John Cochrane, Tom Cosimano, Amanda Friedenberg, George Korniotis, Markus Brunermeier and Paul Schultz for helpful discussions and to participants at two Notre Dame seminars, at the 2006 Spring Midwest Economic Theory and International Economics Conference, and at the 2006 Australasian Meeting of the Econometric Society for their very useful comments. I began working on this project during a year-long visit to the Central Bank of Venezuela. I gratefully acknowledge their hospitality and financial support.     

基于动态最优控制的低品位矿产资源效率问题

本文运用最优控制理论与方法,结合动态投入产出模型,构建了基于低品位矿产资源的动态投入产出最优控制模型,为低品位矿产资源综合利用的效率提升提供一种新思路和方法.