Information Theory and Biased Beliefs

Andrew T. Little

No vfqy2, OSF Preprints from Center for Open Science

Abstract: Beliefs can be incorrect or biased in many ways. I propose a unifying microfoundation for many well-documented biases using ideas from information theory. The common theme is that subjective beliefs are the solution to an optimization problem where one goal is accuracy, formalized by minimizing Kullback-Leibler divergence from the objective belief. Correct beliefs are a special case where accuracy is the only goal. Other goals or constraints produce biases such as motivated beliefs, partition dependence, anchoring, overconfidence, confirmation bias, base-rate neglect, and conservatism.

Date: 2022-11-28
New Economics Papers: this item is included in nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:vfqy2

DOI: 10.31219/osf.io/vfqy2

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