Abstract

http://ssrn.com/abstract=2263504
 


 



Updating Beliefs When Evidence is Open to Interpretation: Implications for Bias and Polarization


Roland G. Fryer Jr.


Harvard University - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; University of Chicago

Philipp Harms


Harvard University - Department of Economics

Matthew O. Jackson


Stanford University - Department of Economics; Santa Fe Institute; Canadian Institute for Advanced Research (CIFAR)

May 2015


Abstract:     
We introduce a model in which agents observe signals about the state of the world, some of which are open to interpretation. Our decision makers use Bayes' rule in an iterative way: first to interpret each signal and then to form a posterior on the sequence of interpreted signals. This 'double updating' leads to confirmation bias and can lead agents who observe the same information to polarize: there can be a greater distance between their beliefs after observing a common sequence of signals than before. Such updating is optimal if agents have bounded memory and sufficiently discount the future. If they are very patient and have bounded memory, then a time-varying random interpretation rule (still double-updating) is optimal. We explore the model in an on-line experiment in which individuals interpret research summaries about climate change and the death penalty and report beliefs. Consistent with the model, there is a significant relationship between an individual's prior and their interpretation of the summaries. More than half of the subjects exhibit a polarizing behavior - shifting their beliefs further from the average belief after seeing the same summaries as all other subjects - something that is inconsistent with standard Bayesian updating, or even naive updating, but consistent with our model.

Number of Pages in PDF File: 41

Keywords: beliefs, polarization, learning, updating, Bayesian updating, biases, discrimination, decision making

JEL Classification: D10, D80, J15, J71, I30


Open PDF in Browser Download This Paper

Date posted: June 5, 2013 ; Last revised: May 4, 2015

Suggested Citation

Fryer, Roland G. and Harms, Philipp and Jackson, Matthew O., Updating Beliefs When Evidence is Open to Interpretation: Implications for Bias and Polarization (May 2015). Available at SSRN: http://ssrn.com/abstract=2263504 or http://dx.doi.org/10.2139/ssrn.2263504

Contact Information

Roland G. Fryer Jr.
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
American Bar Foundation
750 N. Lake Shore Drive
Chicago, IL 60611
United States
University of Chicago ( email )
1101 East 58th Street
Chicago, IL 60637
United States
Philipp Harms
Harvard University - Department of Economics ( email )
1875 Cambridge Street
Cambridge, MA 02138
United States
Matthew O. Jackson (Contact Author)
Stanford University - Department of Economics ( email )
Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
1-650-723-3544 (Phone)
HOME PAGE: http://www.stanford.edu/~jacksonm
Santa Fe Institute
1399 Hyde Park Road
Santa Fe, NM 87501
United States
Canadian Institute for Advanced Research (CIFAR) ( email )
180 Dundas Street West, Suite 1400
Toronto, Ontario
Canada
Feedback to SSRN


Paper statistics
Abstract Views: 1,498
Downloads: 359
Download Rank: 50,954

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.328 seconds