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