Discussion Paper Details

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Title: Learning about one's self

Author(s): Yves Le Yaouanq and Peter Schwardmann

Publication Date: February 2019

Keyword(s): Bayesian updating, learning, Naivete and present bias

Programme Area(s): Industrial Organization

Abstract: How can naiveté about present bias persist despite experience? To answer this question, our experiment investigates participants' ability to learn from their own behavior. Participants decide how much to work on a real effort task on two predetermined dates. In the week preceding each work date, they state their commitment preferences and predictions of future effort. While we find that participants are present biased and initially naive about their bias, our methodology enables us to establish that they are Bayesian in how they learn from their experience at the first work date. A treatment in which we vary the nature of the task at the second date further shows that learning is unencumbered by a change in environment. Our results suggest that persistent naiveté cannot be explained by a fundamental inferential bias. At the same time, we find that participants initially underestimate the information that their experience will provide - a bias that may lead to underinvestment in experimentation and a failure to activate self-regulation mechanisms.

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Bibliographic Reference

Le Yaouanq, Y and Schwardmann, P. 2019. 'Learning about one's self'. London, Centre for Economic Policy Research.