Which aspect of bad news relates to the probability of the bad event occurring?

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Abstract

We study processing and acquisition of objective information regarding qualities that people care about, intelligence and beauty. Subjects receiving negative feedback did not respect the strength of these signals, were far less predictable in their updating behavior and exhibited an aversion to new information. In response to good news, inference conformed more closely to Bayes' Rule, both in accuracy and precision. Signal direction did not affect updating or acquisition in our neutral control. Unlike past work, our design varied direction and agreement with priors independently. The results indicate that confirmation bias is driven by direction; confirmation alone had no effect.

Journal Information

American Economic Journal: Microeconomics publishes papers focusing on microeconomic theory, industrial organization and the microeconomic aspects of international trade, political economy, and finance. The journal publishes theoretical work as well as both empirical and experimental work with a theoretical framework.

Publisher Information

Once composed primarily of college and university professors in economics, the American Economic Association (AEA) now attracts 20,000+ members from academe, business, government, and consulting groups within diverse disciplines from multi-cultural backgrounds. All are professionals or graduate-level students dedicated to economics research and teaching.

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American Economic Journal: Microeconomics © 2011 American Economic Association
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