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Contingent Belief Updating

Chiara Aina (), Andrea Amelio () and Katharina Brütt
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Chiara Aina: Department of Economics, Harvard University
Andrea Amelio: Bonn Graduate School of Economics, University of Bonn

No 263, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We study how contingent thinking – that is, reasoning through all possible contingencies without knowing which is realized – affects belief updating. According to the Bayesian benchmark, beliefs updated after exposure to new information should be equivalent to beliefs assessed for the contingency of receiving such information. Using an experiment, we decompose the effect of contingent thinking on belief updating into two components: (1) hypothetical thinking (updating on a piece of not-yet-observed information) and (2) contrast reasoning (comparing multiple contingencies during the updating process). Our results show that contingent thinking increases deviations from Bayesian updating and that this effect can be attributed to hypothetical thinking.

Keywords: Belief Updating; Contingent Thinking; Experiment (search for similar items in EconPapers)
JEL-codes: C91 D83 D91 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2023-11
New Economics Papers: this item is included in nep-cbe and nep-exp
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