Contingent Belief Updating

We study the effect of contingent thinking on belief updating. One possible explanation for biased beliefs is that agents distort the underlying data generating process when updating their beliefs given a new piece of information. Engaging in contingent thinking — that is, reasoning through all possible contingencies without knowing which is realized — might affect the agents’ understanding of the data generating process, resulting in differences in belief updating. . Through a series of online experiments, we aim to uncover and break down the effect of contingent thinking on belief distortions into two components: (1) hypothetical thinking (updating on a piece of not-yet-observed information) and (2) contrast reasoning (comparing multiple contingencies during the updating task). Our project will proceed in three steps. First, we plan to establish the effects of contingent reasoning in a neutral task and investigate possible mechanisms by looking at heterogeneous treatment effects depending on the characteristics of the data generating process and individual characteristics. Second, we want to compare the impact of continent reasoning in other domains, specifically in an ego-relevant task. Third, we intend to examine whether contingent belief updating translates into changes in actions, and thus study the role of commitment in beliefs.