Estimating the causal effect of beliefs on contributions in repeated public good games

We use instrumental variables for estimating the causal effect of beliefs on contributions in repeated public good games. The effect is about half as large as suggested by ordinary least squares. Thus, we present evidence that beliefs have a causal effect on contributions, but also that beliefs are endogenous. We compare the causal, belief-based model of contributions to alternative models based on matching the previous contributions of others and responding to one’s deviation from the average in the previous round. The causal, belief-based model performs well, indicating that beliefs have a central role in determining contributions.