Why Do People Give Less Weight to Advice the Further it is from Their Initial Opinion?
Central Bank of Norway - Department of Economics
April 16, 2010
Norges Bank Working Paper No. 2010/04
Experimental studies on decision making based on advice received from others find that the weight put on the advice is negatively related to the distance between the advice and the decisionmaker's initial opinion. In this paper, we show that the distance effect can follow from rational signal extraction when the decisionmaker has imperfect knowledge about the advisor's competence. What drives the result is the assumption that the decisionmaker is better informed about her own competence than about the advisor's competence.
Number of Pages in PDF File: 19
Keywords: Distance Effect, Policy Decision Making, Signal Extraction, Uncertainty
JEL Classification: C11, D78, D82, D83working papers series
Date posted: May 20, 2010
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