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Limited Cognitive Ability and Selective Information Processing

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  • 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.

Suggested Citation

  • Leung, B. T. K., 2018. "Limited Cognitive Ability and Selective Information Processing," Cambridge Working Papers in Economics 1891, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1891
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    References listed on IDEAS

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    4. Dan M. Kahan & Ellen Peters & Maggie Wittlin & Paul Slovic & Lisa Larrimore Ouellette & Donald Braman & Gregory Mandel, 2012. "The polarizing impact of science literacy and numeracy on perceived climate change risks," Nature Climate Change, Nature, vol. 2(10), pages 732-735, October.
    5. Steiner, Jakub & Jehiel, Philippe, 2017. "On Second Thoughts, Selective Memory, and Resulting Behavioral Biases," CEPR Discussion Papers 12546, C.E.P.R. Discussion Papers.
    6. Hetherington, Marc J., 2009. "Review Article: Putting Polarization in Perspective," British Journal of Political Science, Cambridge University Press, vol. 39(2), pages 413-448, April.
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    Cited by:

    1. Goette, L. & Han, H. J. & Leung, B. T. K., 2020. "Information Overload and Confirmation Bias," Cambridge Working Papers in Economics 2019, Faculty of Economics, University of Cambridge.

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    More about this item

    Keywords

    limited ability; information overload; information avoidance; confirmation bias; wishful thinking; polarization;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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