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The Good News-Bad News Effect: Asymmetric Processing of Objective Information about Yourself

  • David Eil
  • Justin M. Rao
Registered author(s):

    We study processing and acquisition of objective information regarding qualities that people care about, intelligence and beauty. Subjects receiving negative feedback did not respect the strength of these signals, were far less predictable in their updating behavior and exhibited an aversion to new information. In response to good news, inference conformed more closely to Bayes' Rule, both in accuracy and precision. Signal direction did not affect updating or acquisition in our neutral control. Unlike past work, our design varied direction and agreement with priors independently. The results indicate that confirmation bias is driven by direction; confirmation alone had no effect. (JEL D82, D83)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.2.114
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    File URL: http://www.aeaweb.org/aej/mic/data/2010-0077_data.zip
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    Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

    Volume (Year): 3 (2011)
    Issue (Month): 2 (May)
    Pages: 114-38

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    Handle: RePEc:aea:aejmic:v:3:y:2011:i:2:p:114-38
    Note: DOI: 10.1257/mic.3.2.114
    Contact details of provider: Web page: https://www.aeaweb.org/aej-microEmail:


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    1. Grether, David M, 1980. "Bayes Rule as a Descriptive Model: The Representativeness Heuristic," The Quarterly Journal of Economics, MIT Press, vol. 95(3), pages 537-57, November.
    2. Raymond Fisman & Sheena S. Iyengar & Emir Kamenica & Itamar Simonson, 2006. "Gender Differences in Mate Selection: Evidence from a Speed Dating Experiment," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 673-697, May.
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    6. Kyle Chauvin & David Laibson & Johanna Mollerstrom, 2011. "Asset Bubbles and the Cost of Economic Fluctuations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 233-260, 08.
    7. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
    8. Babcock, Linda & Wang, Xianghong & Lowenstein, George, 1996. "Choosing the Wrong Pond: Social Comparisons in Negotiations That Reflect a Self-Serving Bias," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 1-19, February.
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