 Belief updating: Does the 'good-news, bad-news' asymmetry extend to purely financial domains?MPRA Paper from University Library of Munich, Germany Abstract: Bayes’ statistical rule remains the status quo for modeling belief updating in both normative and descriptive models of behavior under uncertainty. Recent research has questioned the use of Bayes’ rule in descriptive models of behavior, presenting evidence that people overweight ‘good news’ relative to ‘bad news’ when updating ego-relevant beliefs. In this paper, we present experimental evidence testing whether this ‘good-news, bad-news’ effect extends to belief updating in the domain of financial decision making, i.e. the domain of most applied economic decision making. We find no evidence of asymmetric updating in this domain. In contrast, the average participant in our experiment is strikingly close to Bayesian in her belief updating. However, we show that this average behavior masks substantial heterogeneity in updating behavior, but we find no evidence in support of a sizeable subgroup of asymmetric updators. Keywords: economic experiments; Bayes’ rule; belief updating; belief measurement; proper scoring rules; subjective probability, motivated beliefs (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:84742 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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