What is the Causal Effect of Knowledge on Preferences?

Jacob LaRiviere, Mikolaj Czajkowski, Nick Hanley and Katherine Simpson Simpson ()
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Katherine Simpson Simpson: Economics Division, University of Stirling, Scotland
Authors registered in the RePEc Author Service: Katherine Needham

No 2015-09, Discussion Papers in Environment and Development Economics from University of St. Andrews, School of Geography and Sustainable Development

Abstract: We use a novel field experiment which jointly tests two implicit assumptions of updating models in a joint framework: that new information leads to new knowledge and that new knowledge can affect economic decisions. In the experiment, we elicit subjects’ prior knowledge state about a good’s attributes, exogenously vary how much new information about good attributes we provide to subjects, elicit subjects’ valuation for the good, and elicit posterior knowledge states about the same good attributes. Testing for changes in knowledge jointly with changes in preferences allows us to horserace updating models more completely than previous studies since we observe ex ante and ex post knowledge states. Our results are consistent with a model of incomplete learning, fatigue and either confirmation bias or costly search coupled with unbiased priors.

Keywords: Learning; Information; Bayesian Updating; Behavioral Economics (search for similar items in EconPapers)
JEL-codes: D81 D83 Q51 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-03
New Economics Papers: this item is included in nep-cbe, nep-knm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: What is the Causal Effect of Knowledge on Preferences? (2015)
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