Subjective Beliefs And Confidence When Facts Are Forgotten

Igor Kopylov and Joshua Benjamin Miller
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Joshua Benjamin Miller: The University of Melbourne

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Abstract: Forgetting a piece of decision-relevant information is a salient source of uncertainty that should influence one's beliefs, confidence, and ambiguity attitudes. To investigate this, we run several experiments where people bet on propositions (facts) that they cannot recall with certainty. We use betting preferences to infer subjects' revealed beliefs and their revealed confidence in these beliefs. Forgetting is induced via interference tasks and time delays (up to one year). We observe a natural memory decay pattern where beliefs become less accurate and confidence is reduced as well. Moreover, we find a form of comparative ignorance where subjects are more ambiguity averse when they cannot recall the truth rather than never having learnt it. In a different vein, we identify an overconfidence pattern: on average, subjects overpay for bets on propositions that they believe in, but underpay for the opposite bets. We formulate a two-signal behavioral model of forgetting that generates all of these patterns. It suggests new testable hypotheses that are confirmed by our data.

Date: 2018-12-29
New Economics Papers: this item is included in nep-exp and nep-neu
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:wktcp

DOI: 10.31219/osf.io/wktcp

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