Updating Beliefs with Ambiguous Evidence: Implications for Polarization
AbstractWe introduce and analyze a model in which agents observe sequences of signals about the state of the world, some of which are ambiguous and open to interpretation. Instead of using Bayes' rule on the whole sequence, our decision makers use Bayes' rule in an iterative way: first to interpret each signal and then to form a posterior on the whole sequence of interpreted signals. This technique is computationally efficient, but loses some information since only the interpretation of the signals is retained and not the full signal. We show that such rules are optimal if agents sufficiently discount the future; while if they are very patient then a time-varying random interpretation rule becomes optimal. One of our main contributions is showing that the model provides a formal foundation for why agents who observe exactly the same stream of information can end up becoming increasingly polarized in their posteriors.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19114.
Date of creation: Jun 2013
Date of revision:
Note: IO LS PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-16 (All new papers)
- NEP-CTA-2013-06-16 (Contract Theory & Applications)
- NEP-MIC-2013-06-16 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Edward L. Glaeser & Cass R. Sunstein, 2013. "Why Does Balanced News Produce Unbalanced Views?," NBER Working Papers 18975, National Bureau of Economic Research, Inc.
- Joan Esteban & Debraj Ray, 2009.
"Linking Conflict to Inequality and Polarization,"
UFAE and IAE Working Papers, Unitat de Fonaments de l'AnÃ lisi EconÃ²mica (UAB) and Institut d'AnÃ lisi EconÃ²mica (CSIC)
766.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 25 Mar 2010.
- Joan Esteban & Debraj Ray, 2011. "Linking Conflict to Inequality and Polarization," American Economic Review, American Economic Association, American Economic Association, vol. 101(4), pages 1345-74, June.
- Coate, Stephen & Loury, Glenn C, 1993.
"Will Affirmative-Action Policies Eliminate Negative Stereotypes?,"
American Economic Review, American Economic Association,
American Economic Association, vol. 83(5), pages 1220-40, December.
- Coate, S. & Loury, G.C., 1992. "Will Affirmative Action Policies Eliminate Negative Stereotypes?," Papers, Boston University - Department of Economics 3, Boston University - Department of Economics.
- Fryer Roland & Jackson Matthew O., 2008. "A Categorical Model of Cognition and Biased Decision Making," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 8(1), pages 1-44, February.
- Antony Millner & Helene Ollivier & Leo Simon, 2014. "Policy experimentation, political competition, and heterogeneous beliefs," Documents de travail du Centre d'Economie de la Sorbonne, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 14050, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
If references are entirely missing, you can add them using this form.