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Precision may harm: The comparative statics of imprecise judgement

Sean Horan and Paola Manzini

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: We consider an agent whose information about the objects of choice is imperfect in two respects: first, their values are perceived with ‘error’; and, second, the realised values cannot be discriminated with absolute ‘precision’. Reasons for imprecise discrimination include limitations in sensory perception, memory function, or the technology that experts use to communicate with decision-makers. We study the effect of increasing precision on the quality of decision-making. When values are perceived ‘without’ error, more precision is unambiguously beneficial. We show that this ceases to be true when values are perceived ‘with’ error. As a practical implication, our results establish conditions where it is counter-productive for an expert to use a finer signalling scheme to communicate with a decision-maker.

Keywords: Stochastic choice; imprecise perception (search for similar items in EconPapers)
JEL-codes: D01 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2018
New Economics Papers: this item is included in nep-mic
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http://hdl.handle.net/1866/20926 (application/pdf)

Related works:
Working Paper: Precision May Harm: The Comparative Statics of Imprecise Judgement (2018) Downloads
Working Paper: Precision May Harm: The Comparative Statics of Imprecise Judgement (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:2018-13

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