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  5. The Status Quo and Belief Polarization of Inattentive Agents: Theory and Experiment

The Status Quo and Belief Polarization of Inattentive Agents: Theory and Experiment

  • Vladimír Novák
  • Andrei Matveenko
  • Silvio Ravaioli
American Economic Journal: Microeconomics (Forthcoming)

Abstract

We show that rational but inattentive agents can become polarized ex-ante. We present how optimal information acquisition, and subsequent belief formation, depend crucially on the agent-specific status quo valuation. Beliefs can systematically—in expectations over all possible signal realizations conditional on the state of the world—update away from the realized truth and even agents with the same initial beliefs might become polarized. We design a laboratory experiment to test the model’s predictions. The results confirm our predictions about the mechanism (rational information acquisition), its effect on beliefs (systematic polarization) and provide general insights into demand for information.

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