Credibility and Credulity: How Beliefs about Beliefs Affect Entry Incentives

Credibility and Credulity: How Beliefs about Beliefs affect Entry Incentives

In this note we investigate the infringement (entry) decision for a firm facing an incumbent patent holder with uncertain patent rights. The entrant risks a dispute by entering, resulting in either a settlement (licensing) or litigation and trial. Using the litigation model described by Priest and Klein, we investigate the expected dispute resolution and its impacts on the entrant’s pre-dispute...

How Do Beliefs about Skill Affect Risky Decisions?∗

Beliefs about relative skill matter for risky decisions such as career choices, market entry, and financial investments. Yet in most laboratory experiments risk is exogenously given and beliefs about relative skill play no role. We use a laboratory experiment free of strategy confounds to isolate the impact of beliefs about relative skill on risky choices. We find that low (high) skill individu...

Can Superstitious Beliefs Affect Market Equilibrium? Personal Beliefs and Beliefs about Others

We investigate whether superstitious beliefs held directly by only a fraction of the population affect market equilibrium. Using data from multiracial Singapore, we find that apartments whose unit numbers end with 8, an auspicious number for Chinese, are sold at 0.9% premium, whereas those that end with 4, an inauspicious number for Chinese, are sold at 1.5% discount. The discount for inauspici...

Beliefs about sparsity affect causal experimentation

What is the best way of figuring out the structure of a causal system composed of multiple variables? One prominent idea is that learners should manipulate each candidate variable in isolation to avoid confounds (known as the “Control of Variables” strategy). Here, we demonstrate that this strategy is not always the most efficient method for learning. Using an optimal learner model which aims t...

"beliefs about Beliefs" without Probabilities