Beliefs and actions in the trust game: creating instrumental variables to estimate the causal effect

Miguel Costa-Gomes, Steffan Huck, Georg Weizsaecker

    Research output: Contribution to journalArticlepeer-review

    30 Citations (Scopus)

    Abstract

    In many economic contexts, an elusive variable of interest is the agent's belief about relevant events, e.g. about other agents' behavior. A growing number of surveys and experiments ask participants to state beliefs explicitly but little is known about the causal relation between beliefs and actions. This paper discusses the possibility of creating exogenous instrumental variables for belief statements, by informing the agent about exogenous manipulations of the relevant events. We conduct trust game experiments where the amount sent back by the second player (trustee) is exogenously varied. The procedure allows detecting causal links from beliefs to actions under plausible assumptions. The IV-estimated effect is significant, confirming the causal role of beliefs.
    Original languageEnglish
    Pages (from-to)298-309
    JournalGames and Economic Behavior
    Volume88
    Early online date22 Oct 2014
    DOIs
    Publication statusPublished - Nov 2014

    Keywords

    • Social capital
    • Trust game
    • Instrumental variables
    • Belief elicitation

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