Belief Formation by Outside Observers
Kyle Hyndman, Erkut Ozbay, Andrew Schotter, and Wolf Z. Ehrblatt ,
( 15 )
Experimental Economics
observers.pdf999.51 KB

In this paper we study the belief formation processes of a group of outside observers making predictions about the actions of a player involved in a repeated game. We document four main results. First, there is substantial heterogeneity in the accuracy of our observers, with average accuracy being quite poor. Second, while there is no difference between the most and the least accurate observer in their initial beliefs, there are striking differences in their belief updating rules.

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