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Peter Hammond (Economics Department) and Ganna Pogrebna (the University of Sheffield)

Can Action Dependent Beliefs Explain Behavioural Anomalies in Experimental Games?

Two fundamental tenets of orthodox game theory are: (i) players choose best responses to their beliefs about other players' stategy choices; (ii) players' beliefs are independent of one's own strategy choice. Together, these tenets exclude the experi-mentally observed prevalence of cooperation in particular games such as prisoner's dilemma or related public good games. Given similar observed anomalies, many experimental economists invoke concepts that alter players' payoffs, like altruism or preferences for being cooperative. Yet Shafir and Tversky have considered magical beliefs and performed experiments involv-ing Newcomb's problem. Other work finds that cooperation in prisoner's dilemma is more likely among twins, especially iden-tical twins. Accordingly, informed by earlier experimental work designed to elicit players' beliefs and to test for best responses, we explicitly allow each player to report beliefs that depend on their own action. Preliminary results from a pilot experiment will be presented.