Belief formation in a signaling game without common prior: an experiment
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Using belief elicitation, the paper investigates the process of belief formation and evolution in a signaling game in which a common prior is not induced. Both prior and posterior beliefs of Receivers about Senders’ types are elicited, as well as beliefs of Senders about Receivers’ strategies. In the experiment, subjects often start with diffuse uniform beliefs and update them in view of observations. However, the speed of updating is influenced by the strength of initial beliefs. An interesting result is that beliefs about the prior distribution of types are updated slower than posterior beliefs, which incorporate Senders’ strategies. In the medium run, for some specifications of game parameters, this leads to outcomes being significantly different from the outcomes of the game in which a common prior is induced. It is also shown that elicitation of beliefs does not considerably change the pattern of play in this game.
KeywordsBeliefs Signaling Experiment Learning Belief elicitation
I would like to thank the School of Economics, University of Nottingham, for financial support and CeDEx for providing access to the infrastructure to run the experiment. At different stages of the project, the paper benefitted from presentations at various conferences, including Foundations of Utility and Risk (FUR) 2016 conference. I thank the editor of this special issue, Ganna Pogrebna, for providing an opportunity for papers presented at the 2016 FUR conference to be considered for publication. I am grateful to an anonymous referee for comments that led to improvements in the paper and to Maria Montero for suggestions to make the exposition better.
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