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

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 possibl...

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Main Authors:	Powdthavee, Nattavudh, Yohanes, Eko Riyanto
Other Authors:	School of Humanities and Social Sciences
Format:	Article
Language:	English
Published:	2015
Subjects:	DRNTU::Social sciences::Economic theory
Online Access:	https://hdl.handle.net/10356/107384 http://hdl.handle.net/10220/25553 http://dx.doi.org/10.1162/REST_a_00453
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Institution:	Nanyang Technological University
Language:	English

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spelling	sg-ntu-dr.10356-1073842019-12-06T22:29:47Z Would you pay for transparently useless advice? A test of boundaries of beliefs in the folly of predictions Powdthavee, Nattavudh Yohanes, Eko Riyanto School of Humanities and Social Sciences DRNTU::Social sciences::Economic theory 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. Published version 2015-05-14T08:25:24Z 2019-12-06T22:29:46Z 2015-05-14T08:25:24Z 2019-12-06T22:29:46Z 2015 2015 Journal Article Powdthavee, N., & Riyanto, Y. 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), 257-272. https://hdl.handle.net/10356/107384 http://hdl.handle.net/10220/25553 http://dx.doi.org/10.1162/REST_a_00453 en Review of economics and statistics © 2015 President and Fellows of Harvard College and the massachusetts institute of Technology. This paper was published in Review of Economics and Statistics and is made available as an electronic reprint (preprint) with permission of President and Fellows of Harvard College and the massachusetts institute of Technology. The paper can be found at the following official DOI: [http://www.mitpressjournals.org/doi/10.1162/REST_a_00453#.VVBTkY6qpBc]. One print or electronic copy may be made for personal use only. Systematic or multiple reproduction, distribution to multiple locations via electronic or other means, duplication of any material in this paper for a fee or for commercial purposes, or modification of the content of the paper is prohibited and is subject to penalties under law. 16 p. application/pdf
institution	Nanyang Technological University
building	NTU Library
country	Singapore
collection	DR-NTU
language	English
topic	DRNTU::Social sciences::Economic theory
spellingShingle	DRNTU::Social sciences::Economic theory Powdthavee, Nattavudh Yohanes, Eko Riyanto Would you pay for transparently useless advice? A test of boundaries of beliefs in the folly of predictions
description	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.
author2	School of Humanities and Social Sciences
author_facet	School of Humanities and Social Sciences Powdthavee, Nattavudh Yohanes, Eko Riyanto
format	Article
author	Powdthavee, Nattavudh Yohanes, Eko Riyanto
author_sort	Powdthavee, Nattavudh
title	Would you pay for transparently useless advice? A test of boundaries of beliefs in the folly of predictions
title_short	Would you pay for transparently useless advice? A test of boundaries of beliefs in the folly of predictions
title_full	Would you pay for transparently useless advice? A test of boundaries of beliefs in the folly of predictions
title_fullStr	Would you pay for transparently useless advice? A test of boundaries of beliefs in the folly of predictions
title_full_unstemmed	Would you pay for transparently useless advice? A test of boundaries of beliefs in the folly of predictions
title_sort	would you pay for transparently useless advice? a test of boundaries of beliefs in the folly of predictions
publishDate	2015
url	https://hdl.handle.net/10356/107384 http://hdl.handle.net/10220/25553 http://dx.doi.org/10.1162/REST_a_00453
_version_	1681036892287533056

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

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