Detecting regime shifts: the role of construal levels on system neglect

Samuel N. Kirshner

Applied Economics Letters, 2023, vol. 30, issue 2, 131-135

Abstract: Decision-makers overreact to noisy signals and underestimate base rates when predicting regime shift due to system neglect. Based on Construal Level (CL) Theory, I posit that a high CL reduces overreactions in stable and high-noise environments but exacerbates underreactions in unstable and low-noise environments relative to individuals with low CLs. My experimental results support this hypothesis, demonstrating that the interaction between individuals’ mindsets and signals’ properties systematically impact over and underreactions when detecting regime shifts.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2021.1979188 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:apeclt:v:30:y:2023:i:2:p:131-135

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2021.1979188

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().