Payoff-Based Belief Distortion
Bibliographic Data
| ID | 9949742 |
|---|---|
| Authors | Peiran Jiao (0000-0001-5207-0287, Maastricht University and Nuffield College, corresponding author) |
| Year | 2020 |
| Volume | 130 |
| Issue | 629 |
| Pages | 1416-1444 |
| Publication date | 2020-02-21 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1093/ej/ueaa019 |
| OpenAlex | W2613962965 |
| Language | EN |
| References cited | 49 |
Heterogeneous beliefs often arise among people with the same information but different personally experienced payoffs. To explain this, I propose a mechanism in which experienced payoffs distort beliefs: gains lead an agent to relatively underweight negative new signals and thus to become overoptimistic, whereas losses do the opposite. I experimentally test this mechanism and find behaviour consistent with its predictions. The experiment created a setting where payoffs carried no informational value for Bayesian updating, and thus offered a strong test for the effect of payoffs on beliefs. The findings were robust, and distinct from alternative mechanisms in important ways
Bayesian probability · Distortion (music · Econometrics · Economics · Experimental economics · Mathematical economics · Mechanism (biology · Microeconomics · Statistics · Stochastic game · Test (biology · Value (mathematics · Artificial Intelligence · Computer Science · Decision-Making and Behavioral Economics · Experimental Behavioral Economics Studies · Mathematics · Media Influence and Politics · Psychology · Social Psychology
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Availability
| Citation velocity | historical |
|---|---|
| Highly cited | No |