Beliefs about Others : A Striking Example of Information Neglect

Abstract

In many games of imperfect information, players can make Bayesian inferences about other players’ types based on the information that is contained in their own type. Several behavioral theories of belief-updating even start from the assumption that players project their own type onto others also when it is not rational. We investigate such inferences in a simple laboratory task, in which types are drawn from one out of two states of the world and participants have to guess the type of another participant. We nd lile evidence for irrational (over-)projection. Instead, between 50% and 70% of the participants in our experiment completely neglect the information contained in their own type and base their choices only on the prior probabilities. Using several experimental interventions, we show that this striking neglect of information is very robust.