Marketing Papers

Document Type

Technical Report

Date of this Version

2016

Publication Source

Management Science

Volume

63

Issue

7

Start Page

2340

Last Page

2352

DOI

10.1287/mnsc.2016.2453

Abstract

A critical component of both economic and perceptual decision making under uncertainty is the belief-formation process. However, most research has studied belief formation in economic and perceptual decision making in isolation. One reason for this separate treatment may be the assumption that there are distinct psychological mechanisms that underlie belief formation in economic and perceptual decisions. An alternative theory is that there exists a common mechanism that governs belief formation in both domains. Here we test this alternative theory by combining a novel computational modeling technique with two well-known experimental paradigms. We estimate a drift-diffusion model (DDM) and provide an analytical method to decode prior beliefs from DDM parameters. Subjects in our experiment exhibit strong extrapolative beliefs in both paradigms. In line with the common mechanism hypothesis, we find that a single computational model explains belief formation in both tasks and that individual differences in belief formation are correlated across tasks.

Copyright/Permission Statement

Originally published in Management Science © 2016 INFORMS

This is a pre-publication version. The final version is available at http://dx.doi.org/10.1287/mnsc.2016.2453

Keywords

extrapolative beliefs, response times, belief updating, sequential effects, hot-hand fallacy, judgment biases, drift-diffusion

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Date Posted: 15 June 2018

This document has been peer reviewed.