Inattention and belief polarization
File(s)NS_Inattentive_R1_final.pdf (629.06 KB)
Accepted version
Author(s)
Nimark, Kristoffer P
Sundaresan, Savitar
Type
Journal Article
Abstract
Disagreement persists over issues that have objective truths. In the presence of increasing amounts of data, such disagreement should vanish, but it is nonetheless observable. This paper studies persistent disagreement in a model where rational Bayesian agents learn about an unobservable state of the world through noisy signals. We show that agents (i) choose signal structures that are more likely to reinforce their prior beliefs and (ii) choose less informative signals when their prior beliefs are more precise. For sufficiently precise beliefs, agents choose completely uninformative signals. We call the former the confirmation effect and the latter the complacency effect. Taken together, the two effects imply that the beliefs of ex ante identical agents over time can cluster in two distinct groups at opposite ends of the belief space. The complacency effect holds uniformly when information cost is proportional to channel capacity, but not when cost is proportional to reduction in entropy.
Date Issued
2019-03
Date Acceptance
2018-12-26
Citation
Journal of Economic Theory, 2019, 180, pp.203-228
ISSN
0022-0531
Publisher
Elsevier
Start Page
203
End Page
228
Journal / Book Title
Journal of Economic Theory
Volume
180
Copyright Statement
© 2018 Elsevier Ltd. All rights reserved. This manuscript is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence http://creativecommons.org/licenses/by-nc-nd/4.0/
Subjects
1401 Economic Theory
1499 Other Economics
Economic Theory
Publication Status
Published
Date Publish Online
2019-01-03