Confidence in Inference

About this event

I study a decision-maker who chooses between objects, each associated with a sample of signals. I axiomatically characterize the set of choices that are consistent with established models of belief updating. A simple thought experiment yields a natural choice pattern that lies outside this set. In particular, the effect of increasing sample size on choice cannot be rationalized by these models. In a controlled experiment, 95% of subjects' choices violate models of belief updating. Using a novel incentive-compatible confidence elicitation mechanism, I find confidence in correctly interpreting samples influences choice. As suggested by the thought experiment, many subjects display a sample size neglect bias which is positively associated with higher confidence.