Formulación del problema

Using experiments with more than 1,000 subjects, this paper provides clean evidence for people’s tendency to neglect correlations in information sources when forming beliefs and the corresponding cognitive mechanisms. While we deliberately designed a tightly controlled and abstract information structure to obtain a clean view on the cognitive bias and corresponding remedies, an interesting question is whether correlation neglect persists in more natural informational environments. While studying belief formation using naturalistic information naturally comes at the loss of some internal validity, in Appendix2.G, we explore one possible avenue by investigating subjects’ behavior when they are confronted with real newspaper reports covering correlated information. To this end, we make use of a naturally occurring informational redundancy in professional GDP forecasts that arose because a German research institute contributed to a joint forecast, but also issued a separate (different) forecast at the same time. Again, the (incentivized) beliefs subjects state when they are confronted with these correlated forecasts are con-sistent with the neglect of informational redundancies, hence suggesting that the bias we identify in this paper also plays out in more naturalistic environments.

Economists have recently increased their efforts to explicitly model erroneous prob-ability judgments (see, e.g., the discussion in Rabin,2013). While most of the literature has focused on formalizing specific biases and drawing out corresponding economic im-plications (Rabin and Schrag,1999; Rabin,2002; Rabin and Vayanos,2010; Benjamin et al.,forthcoming), more recently economists have started to model the mental process of belief formation (Gennaioli and Shleifer,2010; Bordalo et al.,2015b; Schwartzstein,

36Also see, e.g., Bordalo et al. (2013), Bordalo et al. (2015a), Taubinsky (2014), Kőszegi and Szeidl (2013), and Gabaix (2014) for the application of limited attention to consumer choice.

2014). While none of these theories are designed to apply in the settings we considered, our empirical results are broadly supportive of this type of models in that we emphasize the interplay of complexity and focus in generating correlation neglect. An interesting question is which other prevalent and economically important features of real informa-tion structures induce the neglect patterns we document in this paper, and how the result-ing biases are conceptually linked to correlation neglect. As our “face value” treatments have shown, the tendency to naïvely process distorted signals is not universal across contexts.

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