On the cost of misperception: General results and behavioural applications
On the cost of misperception: General results and behavioural applications — Journal of Economic Theory, 177: 816-847, 2018
Abstract
In a choice model, we characterize the loss induced by misperceptions of payoff- relevant parameters across a distribution of decision problems. When the agent cannot avoid misperceptions but has some control over the distribution of errors, we show that strategies that minimize loss from misperception exhibit systematic biases, akin to some documented in the behavioural and psychological literatures. We include illusion of control, order effect, overprecision, and overweighting of small probabilities as illustrative examples.
Journal of Economic Theory, 177: 816-847, 2018
Citation
BibTeX citation:
@article{gossner2018,
author = {Gossner, Olivier and Steiner, Jakub},
title = {On the Cost of Misperception: {General} Results and
Behavioural Applications},
journal = {Journal of Economic Theory},
date = {2018},
url = {https://gossner.me/papers/on-the-cost-of-misperception-general-results-and-behavioural-applications.html},
langid = {en},
abstract = {In a choice model, we characterize the loss induced by
misperceptions of payoff- relevant parameters across a distribution
of decision problems. When the agent cannot avoid misperceptions but
has some control over the distribution of errors, we show that
strategies that minimize loss from misperception exhibit systematic
biases, akin to some documented in the behavioural and psychological
literatures. We include illusion of control, order effect,
overprecision, and overweighting of small probabilities as
illustrative examples.}
}
For attribution, please cite this work as:
Gossner, Olivier, and Jakub Steiner. 2018. “On the Cost of
Misperception: General Results and Behavioural Applications.”
Journal of Economic Theory. https://gossner.me/papers/on-the-cost-of-misperception-general-results-and-behavioural-applications.html.