CeNDEF Seminar: Peiran Jiao (University of Oxford)

11Oct2017 16:00 - 17:15

Lecture

'Payoff-Based Belief Distortion'

Abstract:

Heterogeneous beliefs often arise among people who have the same information but different payoff experiences. This paper proposes an explanation in which the experience of realized payoffs distort beliefs: gains lead an agent to underweight negative signals about future outcomes and thus to become overoptimistic, whereas losses do the opposite. I experimentally test the model, and find behaviors consistent with its predictions in a design where experienced payoffs carried no informational value for Bayesian updating. The proposed mechanism is distinct from reinforcement learning, confirmation bias, and attention-based explanations.
Please contact Anita Kopanyi-Peuker if you have any questions about the lecture.

Location

Room 1.60
Tinbergen Institute Amsterdam
Gustav Mahlerplein 117
1082MS Amsterdam

Published by  Economics and Business