Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/60836 
Authors: 
Year of Publication: 
2010
Series/Report no.: 
Staff Report No. 454
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
A pervasive concern with the use of subjective data in choice models is that the data are biased and endogenous. This paper examines the extent to which cognitive biases plague subjective data, specifically addressing 1) whether cognitive dissonance affects the reporting of beliefs, and 2) whether individuals exert sufficient mental effort when probed about their subjective beliefs. For this purpose, I collect a unique panel data set of Northwestern University undergraduates that contains their subjective expectations about outcomes specific to different majors in their choice set. I do not find evidence of cognitive biases systematically affecting the reporting of beliefs: By analyzing patterns of belief updating, I can rule out cognitive dissonance being a serious concern in the current setting. Moreover, there seems to be no systematic (nonclassical) measurement error in the reporting of beliefs. In the reported beliefs for the various majors, I find no systematic patterns in mental recall of previous responses or in the extent of rounding. Comparison of subjective beliefs with objective measures suggests that students have well-formed expectations. Overall, the results paint a favorable picture for the use of subjective expectations data in choice models.
Subjects: 
College majors
expectations
cognitive biases
endogeneity
dissonance
JEL: 
D8
I2
J1
J7
Document Type: 
Working Paper

Files in This Item:
File
Size
273.26 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.