67 Pages Posted: 24 Feb 2017
Date Written: February 22, 2017
Many decision contexts require economic actors to learn from something they do not see, yet corresponding evidence on people’s cognition is scarce. In a tightly structured and transparent laboratory experiment, many subjects fully neglect what they do not see. A series of treatment variations uncovers that such neglect arises because a particular aspect of complexity induces an excessively narrow mental frame, so that people do not even notice or think about what they do not see. Thus, complexity generates errors in deliberate – and highly confident – statistical reasoning through its effect on how people mentally frame updating problems.
Keywords: Bounded Rationality; Complexity; Mental Frames; Attention
JEL Classification: D03; D80; D84
Suggested Citation: Suggested Citation