The Good News-Bad News Effect: Asymmetric Processing of Objective Information about Yourself
01 May 2011-American Economic Journal: Microeconomics (American Economic Association)-Vol. 3, Iss: 2, pp 114-138
TL;DR: The results indicate that confirmation bias is driven by direction; confirmation alone had no effect and inference conformed more closely to Bayes' Rule, both in accuracy and precision.
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. ( JEL D82, D83)
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TL;DR: This article found that women tend to respond less favorably to competition than men and that gender differences in competitiveness tend to result from differences in overconfidence and in attitudes toward competition, and they concluded that what could and should be done to encourage qualified males and females to compete.
Abstract: Laboratory studies have documented that women often respond less favorably to competition than men. Conditional on performance, men are often more eager to compete, and the performance of men tends to respond more positively to an increase in competition. This means that few women enter and win competitions. We review studies that examine the robustness of these differences as well the factors that may give rise to them. Both laboratory and field studies largely confirm these initial findings, showing that gender differences in competitiveness tend to result from differences in overconfidence and in attitudes toward competition. Gender differences in risk aversion, however, seem to play a smaller and less robust role. We conclude by asking what could and should be done to encourage qualified males and females to compete.
666 citations
TL;DR: In this paper, the Gale-Shapley algorithm was used to predict stable matches among the users of a major online dating service, and the estimated mate preferences, in conjunction with the algorithm, can explain the matching patterns in offline, real-world marriages.
Abstract: This paper studies the economics of match formation using a novel data set obtained from a major online dating service. Using detailed information on the users' attributes and interactions, we estimate a model of mate preferences. Based on the estimated preferences, we use the Gale-Shapley algorithm to predict the stable matches among the users of the dating site. Comparing the predicted and observed matching patterns, we find that the Gale-Shapley model explains the matches achieved by the online dating market well, and that the matches are approximately efficient (within the class of stable matches). We then explore whether the estimated mate preferences, in conjunction with the Gale-Shapley algorithm, can explain the matching patterns in offline, real-world marriages. We find that we can predict assortative mating patterns that are similar to those observed in marriages. As the Gale-Shapley algorithm predicts match outcomes in the absence of search costs, we conclude that mate preferences, not search frictions, explain much of the strong degree of sorting along various attributes in marriages.
492 citations
TL;DR: In this article, the Gale-Shapley algorithm was used to predict offline matches in online dating sites, and the predicted matches are similar to the actual matches achieved by the dating site.
Abstract: Using data on user attributes and interactions from an online dating site, we estimate mate preferences, and use the Gale-Shapley algorithm to predict sta ble matches. The predicted matches are similar to the actual matches achieved by the dating site, and the actual matches are approximately efficient. Outof-sample predictions of offline matches, i.e., marriages, exhibit assortative mating patterns similar to those observed in actual marriages. Thus, mate pref erences, without resort to search frictions, can generate sorting in marriages. However, we underpredict some of the correlation patterns; search frictions may play a role in explaining the discrepancy. (
436 citations
TL;DR: In this article, the authors provide a perspective into the main ideas and findings emerging from the growing literature on motivated beliefs and reasoning, emphasizing that beliefs often fulfill important psychological and functional needs of the individual.
Abstract: In the economic models of old, agents had backward-looking expectations, arising from simple extrapolation or error-correction rules. Then came the rational-expectations revolution in macroeconomics, and in microeconomics the spread and increasing refinements of modern game theory. Agents were now highly sophisticated information processors, who could not be systematically fooled. This approach reigned for several decades until the pendulum swung back with the rise of behavioral economics and its emphasis on “heuristics and biases” (as in Tversky and Kahneman 1974). Overconfidence, confirmation bias, distorted probability weights, and a host of other “wired-in” cognitive mistakes are now common assumptions in many areas of economics. Over the last decade or so, the pendulum has started to swing again toward some form of adaptiveness, or at least implicit purposefulness, in human cognition. In this paper, we provide a perspective into the main ideas and findings emerging from the growing literature on motivated beliefs and reasoning. This perspective emphasizes that beliefs often fulfill important psychological and functional needs of the individual. Economically relevant examples include confidence in ones’ abilities, moral self-esteem, hope and anxiety reduction, social identity, political ideology and religious faith. People thus hold certain beliefs in part because
371 citations
TL;DR: This article provided a perspective on the economic interplay of three types of actors: donors, charitable organizations, and government, and found that in a typical year, total charitable gifts of money now exceed 2 percent of gross domestic product.
Abstract: Through good and bad economic times, charitable gifts have continued to roll in largely unabated over the past half century. In a typical year, total charitable gifts of money now exceed 2 percent of gross domestic product. Moreover, charitable giving has nearly doubled in real terms since 1990, and the number of nonprofit organizations registered with the IRS grew by nearly 60 percent from 1995 to 2005. This study provides a perspective on the economic interplay of three types of actors: donors, charitable organizations, and government. How much is given annually? Who gives? Who are the recipients of these gifts? Would changes in the tax treatment of charitable contributions lead to more or less giving? How can charitable institutions design mechanisms to generate the greatest level of gifts? What about the effectiveness of seed money and matching grants?
325 citations
References
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Book•
01 Jan 1974TL;DR: The authors described three heuristics that are employed in making judgements under uncertainty: representativeness, availability of instances or scenarios, and adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available.
Abstract: This article described three heuristics that are employed in making judgements under uncertainty: (i) representativeness, which is usually employed when people are asked to judge the probability that an object or event A belongs to class or process B; (ii) availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development; and (iii) adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available. These heuristics are highly economical and usually effective, but they lead to systematic and predictable errors. A better understanding of these heuristics and of the biases to which they lead could improve judgements and decisions in situations of uncertainty.
31,082 citations
Book•
01 Jan 1957TL;DR: Cognitive dissonance theory links actions and attitudes as discussed by the authors, which holds that dissonance is experienced whenever one cognition that a person holds follows from the opposite of at least one other cognition that the person holds.
Abstract: Cognitive dissonance theory links actions and attitudes It holds that dissonance is experienced whenever one cognition that a person holds follows from the opposite of at least one other cognition that the person holds The magnitude of dissonance is directly proportional to the number of discrepant cognitions and inversely proportional to the number of consonant cognitions that a person has The relative weight of any discrepant or consonant element is a function of its Importance
22,553 citations
"The Good News-Bad News Effect: Asym..." refers background in this paper
...The notion of cognitive dissonance was introduced formally by Festinger (1957). For a review see Simons et al....
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Book•
01 Jan 1958TL;DR: The psychology of interpersonal relations as mentioned in this paper, The psychology in interpersonal relations, The Psychology of interpersonal relationships, کتابخانه دیجیتال و فن اطلاعات دانشگاه امام صادق(ع)
Abstract: The psychology of interpersonal relations , The psychology of interpersonal relations , کتابخانه دیجیتال و فن آوری اطلاعات دانشگاه امام صادق(ع)
15,254 citations
TL;DR: Confirmation bias, as the term is typically used in the psychological literature, connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs, expectations, or a h...
Abstract: Confirmation bias, as the term is typically used in the psychological literature, connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs, expectations, or a h...
5,214 citations
TL;DR: In this paper, subjects supporting and opposing capital punishment were exposed to two purported studies, one seemingly confirming and one seemingly disconfirming their existing beliefs about the deterrent efficacy of the death penalty.
Abstract: People who hold strong opinions on complex social issues are likely to examine relevant empirical evidence in a biased manner. They are apt to accept "confirming" evidence at face value while subjecting "discontinuing" evidence to critical evaluation, and as a result to draw undue support for their initial positions from mixed or random empirical findings. Thus, the result of exposing contending factions in a social dispute to an identical body of relevant empirical evidence may be not a narrowing of disagreement but rather an increase in polarization. To test these assumptions and predictions, subjects supporting and opposing capital punishment were exposed to two purported studies, one seemingly confirming and one seemingly disconfirming their existing beliefs about the deterrent efficacy of the death penalty. As predicted, both proponents and opponents of capital punishment rated those results and procedures that confirmed their own beliefs to be the more convincing and probative ones, and they reported corresponding shifts in their beliefs as the various results and procedures were presented. The net effect of such evaluations and opinion shifts was the postulated increase in attitude polarization. The human understanding when it has once adopted an opinion draws all things else to support and agree with it. And though there be a greater number and weight of instances to be found on the other side, yet these it either neglects and despises, or else by some distinction sets aside and rejects, in order that by this great and pernicious predetermination the authority of its former conclusion may remain inviolate. (Bacon, 1620/1960)
3,808 citations
"The Good News-Bad News Effect: Asym..." refers background in this paper
...Papers in the second category use more realistic underlying quantities, such as personal skill (Gifford W. Bradley 1978), opinions on important issues (Charles Lord, Lee Ross and Mark R. Lepper 1979) and moral judgment (Linda Babcock and George Loewenstein 1997), but employ subjective information structures such as written articles or fictional back-stories....
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...A robust finding is that when given the same evidence, both sides of the debate become more convinced of their prior opinions (Lord, Ross and Lepper 1979, Michael J. Mahoney 1977, Scott Plous 1991, Raymond Nickerson 1998)....
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...Previous explanations fall broadly into two categories: 1) biased processing (Lord, Ross and Lepper 1979, Matthew Rabin and Joel L. Schrag 1999, Bradley 1978, Grether 1980) 2) endogenous recall and acquisition (George A. Akerlof and William T. Dickens 1982, Walter Mischel 1976, Benabou and Tirole 2002)....
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...The quantity is usually not directly tied o belief utility but indirectly linked through identity (e.g. sides of a hot political debate (Plous 1991, Lord, Ross and Lepper 1979) or beliefs which drove costly effort in the past (Mahoney 1977))....
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...Lord, Charles, Lee Ross, and Mark R. Lepper.1979....
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