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Why do people give less weight to advice the further it is from their initial opinion?

Author

Listed:
  • Francesco Ravazzolo

    () (Norges Bank (Central Bank of Norway))

  • Øistein Røisland

    () (Norges Bank (Central Bank of Norway))

Abstract

Experimental studies on decision making based on advice received from others find that the weight put on the advice is negatively related to the distance between the advice and the decisionmaker's initial opinion. In this paper, we show that the distance effect can follow from rational signal extraction when the decisionmaker has imperfect knowledge about the advisor's competence. What drives the result is the assumption that the decisionmaker is better informed about her own competence than about the advisor's competence.

Suggested Citation

  • Francesco Ravazzolo & Øistein Røisland, 2010. "Why do people give less weight to advice the further it is from their initial opinion?," Working Paper 2010/04, Norges Bank.
  • Handle: RePEc:bno:worpap:2010_04
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    File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2010/WP-201004/
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    More about this item

    Keywords

    Distance effect; Policy decision making; Signal extraction; Uncertainty;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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