The Self-Perpetuation of Biased Beliefs

Wing Suen

Economic Journal, 2004, vol. 114, issue 495, 377-396

Abstract: To overcome strong prior beliefs, strong evidence to the contrary is needed. If a person is predisposed to choosing a certain action, the advice from an advisor who sets a low threshold for recommending the alternative action is not of much use. The preference for like-minded advisors who supply coarse information implies that the advice a person receives is likely to reinforce his existing priors. This effect can lead to polarisation of opinion and the emergence of self-serving beliefs. The learning process is prolonged and the induced short run bias can become perpetual if information is costly. Copyright 2004 Royal Economic Society.

Date: 2004
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