Good News and Bad News with Uncertain Precision: An Experiment

Project: Research

Project Details

Description

A better understanding of how individuals form and update their beliefs is important if we want to understand how they make choices. In standard models of decision making under uncertainty, a decision maker updates his beliefs using Bayes' rule whenever new information arrives. Then, using those beliefs, he makes choices that maximize his expected utility. Whether news are good or bad does not play a role in how beliefs are updated. All that matters is their informativeness. The hypothesis of this project is that individuals, when updating their beliefs, favor news that support a desirable event (good news) over news that contradict that event (bad news), deviating from the symmetry prescribed by Bayes' rule. We want to test this hypothesis using experimental data. Since many decision situations involve updating beliefs about desirable events, this is an issue that deserves attention.
StatusFinished
Effective start/end date08/07/1607/10/17

Project funding

  • Internal
  • PONTIFICIA UNIVERSIDAD JAVERIANA