Staff Report, Federal Reserve Bank of New York 516
We investigate how college students form and update their beliefs about future earnings using a unique information experiment. We provide college students true information about the population distribution of earnings and observe how this information causes respondents to update their beliefs about their own future earnings. We show that college students are substantially misinformed about population earnings and logically revise their self-beliefs in response to the information we provide, with larger revisions when the information is more specific and is good news. We classify the updating behaviors observed and find that the majority of students are non-Bayesian updaters.
belief updating college majors information uncertainty subjective expectations Bayesian updating