Economics Seminar (Theory): Inga Deimen, University of Arizona

ABSTRACT: When does more information robustly increase an agent’s welfare—when does Blackwell monotonicity hold? In the standard setup, Blackwell (1951, 1953) shows that all agents with a Bayesian updating rule weakly benefit from more information, regardless of the decision problem they face. This paper goes beyond the standard setup by studying Blackwell monotonicity in settings with motivated reasoning and psychological preferences. That is, (1) we allow agents to freely choose their subjective belief up to some (exogenous) constraints described by their reasoning type and (2) we allow for decision problems with belief-dependent preferences. We find that Blackwell monotonicity holds if and only if the agent’s reasoning type is shrinking in support, i.e., a larger support of the objective belief implies a smaller choice of subjective beliefs.