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Would you pay for transparently useless advice?: a test of boundaries of beliefs in the folly of predictions

Powdthavee, Nattavudh and Riyanto, Yohanes E. (2015) Would you pay for transparently useless advice?: a test of boundaries of beliefs in the folly of predictions. Review of Economics and Statistics, 97 (2). pp. 257-272. ISSN 0034-6535

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Identification Number: 10.1162/REST_a_00453

Abstract

Standard economic models assume that the demand for expert predictions arises only under the conditions in which individuals are uncertain about the underlying process generating the data and there is a strong belief that past performances predict future performances. We set up the strongest possible test of these assumptions. In contrast to the theoretical suggestions made in the literature, people are willing to pay for predictions of truly random outcomes after witnessing only a short streak of accurate predictions live in the lab. We discuss potential explanations and implications of such irrational learning in the contexts of economics and finance.

Item Type: Article
Official URL: http://www.mitpressjournals.org/loi/rest
Additional Information: © 2015 President and Fellows of Harvard College and the Massachusetts Institute of Technology
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > H Social Sciences (General)
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 05 May 2015 13:46
Last Modified: 20 Mar 2019 02:40
Funders: Nanyang Technological University
URI: http://eprints.lse.ac.uk/id/eprint/61794

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