Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208070
Authors: 
Barron, Kai
Year of Publication: 
2019
Series/Report no.: 
Discussion Paper No. 170
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
Bayes' statistical rule remains the status quo formodeling belief updating in both normative and descriptive models of behavior under uncertainty. Some recent research has questioned the use of Bayes' rule in descriptive models of behavior, presenting evidence that people overweight 'good news' relative to 'bad news' when updating ego-relevant beliefs. In this paper, we present experimental evidence testing whether this 'good-news, bad-news' effect is present in a financial decision making context (i.e. a domain that is important for understanding much economic decision making). We find no evidence of asymmetric updating in this domain. In contrast, in our experiment, belief updating is close to the Bayesian benchmark on average. However, we show that this average behavior masks substantial heterogeneity in individual updating behavior. We find no evidence in support of a sizeable subgroup of asymmetric updators.
Subjects: 
economic experiments
Bayes' rule
belief updating
belief measurement
proper scoring rules
motivated beliefs
JEL: 
C11
C91
D83
Document Type: 
Working Paper

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