The benefits of being misinformed

Marcus Roel () and Manuel Staab
Additional contact information
Marcus Roel: BNU - Beijing Normal University

Working Papers from HAL

Abstract: In the spirit of Blackwell (1951), we analyze how two fundamental mistakes in information processing-incorrect beliefs about the world and misperception of information-affect the expected utility ranking of information experiments. We explore their individual and combined influence on welfare and provide necessary and sufficient conditions when mistakes alter and possibly reverse the ranking of information experiments. Both mistakes by themselves reduce welfare in a model where payoff relevant actions also generate informative signals. This is true for naive decisionmakers, unaware of any errors, as well as for sophisticated decision-makers, who account for the possibility of mistakes. However, mistakes can interact in non-obvious ways and an agent might be better off suffering from both, rather than just one. We provide a characterization when such positive interactions are possible. Surprisingly, this holds true only for naive decision-makers and thus naivete can be beneficial. We discuss implications for information acquisition and avoidance, welfare-improving belief manipulation, and policy interventions in general.

Keywords: ranking of experiments; information acquisition; misperception; confirmation bias; overconfidence; underconfidence (search for similar items in EconPapers)
Date: 2021-02-16
New Economics Papers: this item is included in nep-mic and nep-upt
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03145270
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://shs.hal.science/halshs-03145270/document (application/pdf)

Related works:
Working Paper: The benefits of being misinformed (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-03145270

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().