Limited higher order beliefs and the welfare effects of public information

We present results of a household-level survey on behaviors regarding refuses in the home waste-waters network. Interpreting survey results in a panel-data logit results show that most socio-economic and public good-related respondent’s characteristics do not play a significant role in explaining choices to discard in the home waste-waters network. The only significant regressor, apart from the nature of the refuse itself, is, by far, the belief that the respondent has about her neighbors’ and relatives’ discarding behavior. We use Dong’s endogeneity test [7] to show that that regressor is not endogenous. We argue that these results may be used by policymakers to reduce undesirable refuses in the home waste-waters network by means of properly designed nudges.