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Abstract

People often face environments where multiple models compete to explain the same observations. This paper examines how people update beliefs in such settings and how preferences over payoff-relevant states shape model selection and belief updating. This paper first develops a framework where preference-driven bias distorts the perceived model, affecting Bayesian and best-fit updating differently. In a laboratory experiment, most participants are classified as Bayesian updaters, who average across models, while a substantial minority are classified as best-fit updaters, who select the model that best fits the observed signal. Within-participant comparisons between the symmetric payoff and asymmetric payoff conditions indicate that asymmetric payoffs shift reported beliefs toward the preferred state, particularly among participants classified as best-fit updaters. Relative to symmetric payoffs, asymmetric payoffs increase the reported belief of the preferred state by about 8 percentage points among best-fit updaters, while the estimated effect among Bayesian updaters is close to zero. These findings help us better understand model-based learning and have implications for domains such as political polarization and financial investment, where competing narratives and strong preferences often coexist.

External presentation

* indicates scheduled presentations

  • Economic Science Association North American Meeting* (Charlottesville, 2026)
  • 21st Economics Graduate Student Conference* (Washington University in St. Louis, 2026)
  • Economic Science Association World Meeting (Los Angeles, 2026)
  • Asian Meeting of the Econometric Society, Hong Kong–China (2026)
  • MEA 90th Annual Meetings (Chicago, 2026)
  • SEA 95th Annual Meetings (Tampa, 2025)
  • Economic Science Association North American Meeting (Tucson, 2025)
  • Illinois Institute of Technology Research Seminar (2025)
  • BEEMA9 Conference (Lehigh University, 2025)
  • WEAI 100th Annual Conference (San Francisco, 2025)
  • Caltech Summer Workshop in Theory-Based Experiments (2025)
  • Economic Science Association World Meeting (Beijing, 2025)
  • Ostrom-Smith Conference (Indiana University, 2025)
  • Spring 2025 Midwest Theory Conference (Virginia Tech, 2025)