Abstract
We experimentally investigate behavior and beliefs in a sequential prisoner’s dilemma. Eachsubject had to choose an action as first-mover and a conditional action as second-mover. Allsubjects also had to state their beliefs about others’ second-mover choices. We find thatsubjects’ beliefs about others’ choices are fairly accurate on average. Using the elicited beliefs,we compare the explanatory power of a few current models of social and moral preferences. Thedata show clear differences in explanatory power between the preference models, both withoutand with control for the number of free parameters. The best-performing models explain about80% of observed behavior. We use the estimated preference parameters to identify biases insubjects’ expectations. We find a consensus bias (whereby subjects believe others behave likethemselves) and a certain optimism (whereby subjects overestimate probabilities for favorableoutcomes), the former being about twice as strong as the second.