Team Production and Esteem: A Dual Selves Model with Belief-Dependent Preferences

We propose a dual selves model to integrate affective responses and belief-dependent emotions into game theory. We apply our model to team production and model a worker as being composed of a rational self, who chooses effort, and an emotional self, who expresses esteem. Similar to psychological game theory, utilities depend on beliefs, but only indirectly. More concretely, emotions affect utilities, and the expression of emotions depends on updated beliefs. Modeling affective responses as actions chosen by the emotional self allows us to apply standard game-theoretic solution concepts. The model reveals that with incomplete information about abilities, workers only choose high effort if esteem is expressed based on interpersonal comparisons and if the preference for esteem is a status preference.

Guilt Aversion and Reciprocity in the Performance-Enhancing Drug Game

We revisit the performance-enhancing drug game by applying models of guilt aversion and reciprocity. Both models fit within the framework of psychological game theory in that they allow payoffs to depend on beliefs. We explore the extent to which social norms can help reduce or eliminate doping in sport. With reciprocity, we see that first-order beliefs on the prevalence of doping are key and a norm of clean sport would require a coordinated shift in such beliefs. With guilt aversion, by contrast, second-order beliefs are key and individuals may have an incentive to race clean even if they expect competitors will dope. Our results point to the importance for sports bodies and coaches to manage the beliefs of athletes.

Preference Based Subjective Beliefs

We test the empirical content of the assumption of preference dependent beliefs using a behavioral model of strategic decision making in which the rankings of individuals over final outcomes in simple games influence their beliefs over the opponent’s behavior. This approach— by analogy with Psychological Game Theory—allows for interdependence between preferences and beliefs but reverses the order of causality. We use existing evidence from a multi-stage experiment in which we first elicit distributional preferences in a Random Dictator Game, then estimate beliefs in a related 2×2 effort game conditional on these preferences. Our structural estimations confirm our working hypothesis on how social preferences shape beliefs: subjects with higher guilt (envy) expect others to put less (more) effort, which reduces the expected difference in payoffs.