Related papers: Rational Aversion to Information
Automated decision systems (ADS) are increasingly used for consequential decision-making. These systems often rely on sophisticated yet opaque machine learning models, which do not allow for understanding how a given decision was arrived…
This paper presents a model of costly information acquisition where decision-makers can choose whether to elaborate information superficially or precisely. The former action is costless, while the latter entails a processing cost. Within…
We study belief revision when information is represented by a set of probability distributions, or general information. General information extends the standard event notion while including qualitative information (A is more likely than B),…
Previous research on expert advice-taking shows that humans exhibit two contradictory behaviors: on the one hand, people tend to overvalue their own opinions undervaluing the expert opinion, and on the other, people often defer to other…
A principal hires an agent to acquire soft information about an unknown state. Even though neither how the agent learns nor what the agent discovers are contractible, we show the principal is unconstrained as to what information the agent…
In financial markets valuable information is rarely circulated homogeneously, because of time required for information to spread. However, advances in communication technology means that the 'lifetime' of important information is typically…
We modify a canonical experimental design to identify the effectiveness of retractions. Comparing beliefs after retractions to beliefs (a) without the retracted information and (b) after equivalent new information, we find that retractions…
A principal who values an object allocates it to one or more agents. Agents learn private information (signals) from an information designer about the allocation payoff to the principal. Monetary transfer is not available but the principal…
This paper diverges from previous literature by considering the utility maximization problem in the context of investors having the freedom to actively acquire additional information to mitigate estimation risk. We derive closed-form value…
Rationality has been an intriguing topic for several decades. Even the scope of definition of rationality across different subjects varies. Several theories (e.g., game theory) initially evolved on the basis that agents (e.g., humans) are…
When does society eventually learn the truth, or take the correct action, via observational learning? In a general model of sequential learning over social networks, we identify a simple condition for learning dubbed excludability.…
When different information sources on a given topic are combined, they interact in a nontrivial manner for a rational receiver of these information sources. Suppose that there are two information sources, one is genuine and the other…
This study extends Blackwell's (1953) comparison of information to a sequential social learning model, where agents make decisions sequentially based on both private signals and the observed actions of others. In this context, we introduce…
A perfectly rational decision-maker chooses the best action with the highest utility gain from a set of possible actions. The optimality principles that describe such decision processes do not take into account the computational costs of…
We study the welfare effects of overreaction to information in the form of diagnostic expectations in markets with asymmetric information, and the effect of a simple intervention in the form of a tax or a subsidy. A large enough level of…
When people receive new information, sometimes they revise their beliefs too much, and sometimes too little. In this paper, we show that a key driver of whether people overinfer or underinfer is the strength of the information. Based on a…
An agent choosing between various actions tends to take the one with the lowest cost. But this choice is arguably too rigid (not adaptive) to be useful in complex situations, e.g., where exploration-exploitation trade-off is relevant in…
In dynamic settings each economic agent's choices can be revealing of her private information. This elicitation via the rationalization of observable behavior depends each agent's perception of which payoff-relevant contingencies other…
A seller offers an asset in a decentralised market. Buyers have private signals about their common value. I study whether the market becomes allocatively more efficient with (i) more buyers, (ii) better-informed buyers. Both increase the…
We consider information filtering, in which we face a stream of items too voluminous to process by hand (e.g., scientific articles, blog posts, emails), and must rely on a computer system to automatically filter out irrelevant items. Such…