Paying is believing: The effect of costly information on Bayesian updating

Robalo, Pedro; Sayag, Rei S.

doi:10.1016/j.jebo.2018.09.016

“…Thus, the data from the meta-analysis sample points to underinference from a sample size of 1. 26 Among experiments with binomial updating problems and a sample size of 1 that did not meet all the criteria for inclusion in the meta-analysis, nearly all found substantial underinference or slight underinference, 27 with one exception (Robalo and Sayag, 2014). 28 One experiment observed overinference in an experimental condition with asymmetric rates that are close to each other .…”

Section: B Evidence From Simultaneous Samplesmentioning

confidence: 99%

Errors in probabilistic reasoning and judgment biases

Benjamin

¹

2019

Handbook of Behavioral Economics: Applications and Foundations 1

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Errors in probabilistic reasoning have been the focus of much psychology research and are among the original topics of modern behavioral economics. This chapter reviews theory and evidence on this topic, with the goal of facilitating more systematic study of belief biases and their integration into economics. The chapter discusses biases in beliefs about random processes, biases in belief updating, the representativeness heuristic as a possible unifying theory, and interactions between biased belief updating and other features of the updating situation. Throughout, I aim to convey how much evidence there is for (and against) each putative bias, and I highlight when and how different biases may be related to each other. The chapter ends by drawing general lessons for when people update too much or too little, reflecting on modeling challenges, pointing to areas of economics to which the biases are relevant, and highlighting some possible directions for future work.

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“…Thus, the data from the meta-analysis sample points to underinference from a sample size of 1. 27 Among experiments with binomial updating problems and a sample size of 1 that did not meet all the criteria for inclusion in the meta-analysis, nearly all found substantial underinference or slight underinference, 28 with one exception (Robalo and Sayag, 2014). 29 One experiment observed overinference in an experimental condition with asymmetric rates that are close to each other .…”

Section: B Evidence From Simultaneous Samplesmentioning

confidence: 99%

Errors in Probabilistic Reasoning and Judgment Biases

Benjamin

¹

2018

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Errors in probabilistic reasoning have been the focus of much psychology research and are among the original topics of modern behavioral economics. This chapter reviews theory and evidence on this topic, with the goal of facilitating more systematic study of belief biases and their integration into economics. The chapter discusses biases in beliefs about random processes, biases in belief updating, the representativeness heuristic as a possible unifying theory, and interactions between biased belief updating and other features of the updating situation. Throughout, I aim to convey how much evidence there is for (and against) each putative bias, and I highlight when and how different biases may be related to each other. The chapter ends by drawing general lessons for when people update too much or too little, reflecting on modeling challenges, pointing to areas of economics to which the biases are relevant, and highlighting some possible directions for future work.

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“…Ashraf, Berry, and Shapiro (2010), Cohen and Dupas (2010), and (Tadesse & Zewdie, 2019) found no evidence for SCT in their research in African countries in the health sector, possibly because of the different context. On the other hand, Hidalgo, Onofa, Oosterbeek, and Ponce (2013) found the sunk cost effect in the school sector in Ecuador and Robalo and Sayag (2018) found that subjects overweigh costly information relative to free information. A recent study in the Netherlands by Ketel, Linde, Oosterbeek, and Van Der Klaauw (2016) of undergraduate students in HE found no impact of sunk costs on motivation to attend and perform in tuition classes run by a private company in the university.…”

Section: Performance and Retention At Universitiesmentioning

confidence: 99%

Let students pay for their higher education: Debate concerning free and subsidized education based on sunk cost theory

Bhayani¹

2020

Journal of Philanthropy and Marketing

2

0

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Governments across the world are grappling with the question about the funding of subsidized higher education (HE). Critics of free or subsidized HE have argued that higher rate of return of graduates serves as enough extrinsic motivation, adding, to the argument that the free or subsidized HE results in lack of intrinsic motivation. Further, critics support their assertion by citing lagging academic performance in countries where HE is free or heavily subsidized. Proponents of the state funding have cited the role of externalities and equal opportunities as the reason for subsidized HE. This study has used sunk cost theory to understand whether making students pay for their own education would impact on their performance and retention by enhancing intrinsic motivation in addition to analyzing the role of parents and the culture. Results indicate that students are impacted by sunk cost fallacy, as opposed to the earlier findings by Ketel et al. (2016), and that making them shoulder part of the tuition fees in form of contribution or student loans would result in “selection effects” where some sort of positive fee (after scholarships and grants) is paid by the students.

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Paying is believing: The effect of costly information on Bayesian updating

Cited by 13 publications

References 44 publications

Errors in probabilistic reasoning and judgment biases

Errors in probabilistic reasoning and judgment biases

Errors in Probabilistic Reasoning and Judgment Biases

Let students pay for their higher education: Debate concerning free and subsidized education based on sunk cost theory

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