On the cost of misperception: General results and behavioral applications

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 behavioral and psychological literatures. We include illusion of control, order effect, overprecision, and overweighting of small probabilities as illustrative examples.

• Publication year

  2018

• Venue

  Journal of Economics Theory

• Publication date

  2018-08-20

• Fields of study

  Computer Science, Economics

• Identifiers
  DOI 10.1016/J.JET.2018.08.003
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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