Updating beliefs with imperfect signals: experimental evidence
This article analyses belief updating when agents receive a signal that restricts the number of possible states of the world. We create an experiment on individual choice under uncertainty. In this experiment, the subject observes an urn, containing yellow and blue balls, whose composition is partially revealed. The subject has to assess the composition of the urn and form an initial belief. Then, he receives a signal that restricts the set of the possible urns from which the initial observed sample is drawn. Once again, he has to estimate the composition of the urn. Our results show that, on the whole, this type of signal increases the frequency of correct assessment. However, differences appear between validating and invalidating signals (i.e. signals that either confirm or disprove the initial belief). The later significantly increase the probability to make a correct assessment whereas validating signals reduce the frequency of correct estimations. We find evidences of lack of persistence in choice under uncertainty. The literature shows that people may persist with their choice even when they are wrong. We show that they may also change even if they are right.
|Date of creation:||2010|
|Publication status:||Published in Working paper GATE 2010-33. 2010|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00550350|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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.:
- David M. Grether, 1980. "Bayes Rule as a Descriptive Model: The Representativeness Heuristic," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 537-557.
- Friedman, Daniel, 1998. "Monty Hall's Three Doors: Construction and Deconstruction of a Choice Anomaly," American Economic Review, American Economic Association, vol. 88(4), pages 933-946, September.
- Gary Charness & Dan Levin, 2005.
"When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect,"
American Economic Review,
American Economic Association, vol. 95(4), pages 1300-1309, September.
- Charness, Gary & Levin, Dan, 2003. "When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect," University of California at Santa Barbara, Economics Working Paper Series qt7g63k28w, Department of Economics, UC Santa Barbara.
- Ouwersloot, Hans & Nijkamp, Peter & Rietveld, Piet, 1998. "Errors in probability updating behaviour : Measurement and impact analysis," Journal of Economic Psychology, Elsevier, vol. 19(5), pages 535-563, October.
- Hoffman, Ross M. & Kagel, John H. & Levin, Dan, 2011. "Simultaneous versus sequential information processing," Economics Letters, Elsevier, vol. 112(1), pages 16-18, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00550350. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.