English

Reputational Algorithm Aversion

Theoretical Economics 2024-08-02 v3 Artificial Intelligence Computer Science and Game Theory Human-Computer Interaction

Abstract

People are often reluctant to incorporate information produced by algorithms into their decisions, a phenomenon called ``algorithm aversion''. This paper shows how algorithm aversion arises when the choice to follow an algorithm conveys information about a human's ability. I develop a model in which workers make forecasts of an uncertain outcome based on their own private information and an algorithm's signal. Low-skill workers receive worse information than the algorithm and hence should always follow the algorithm's signal, while high-skill workers receive better information than the algorithm and should sometimes override it. However, due to reputational concerns, low-skill workers inefficiently override the algorithm to increase the likelihood they are perceived as high-skill. The model provides a fully rational microfoundation for algorithm aversion that aligns with the broad concern that AI systems will displace many types of workers.

Keywords

Cite

@article{arxiv.2402.15418,
  title  = {Reputational Algorithm Aversion},
  author = {Gregory Weitzner},
  journal= {arXiv preprint arXiv:2402.15418},
  year   = {2024}
}
R2 v1 2026-06-28T14:58:29.123Z