| By: |
Leung, B. T. K. |
| Abstract: |
This paper studies the information processing behavior of a decision maker
(DM) who can only process a subset of all the information he receives: before
taking an action, the DM receives sequentially a number of signals and decides
whether to process or ignore each of them as it is received. The model
generates an information processing behavior consistent with that documented
in the psychological literature: first, the DM chooses to process signals that
are strong; second, his processing strategy exhibits confirmation bias if he
has a strong prior belief; third, he tends to process signals that suggest
favorable outcomes (wishful thinking). As an application I analyze how the
Internet and the induced change in information availability affects the
processing behavior of the DM. I show that providing more/better information
to the DM could strengthen his confirming bias. |
| Keywords: |
limited ability, information overload, information avoidance, confirmation bias, wishful thinking, polarization |
| JEL: |
D83 D90 |
| Date: |
2018–12–06 |
| URL: |
http://d.repec.org/n?u=RePEc:cam:camdae:1891&r=all |