Learning Source Biases: Multisource Misspecifications and Their Impact on Predictions

Junnan He, Lin Hu, Matthew Kovach and Anqi Li

Papers from arXiv.org

Abstract: We study how a Bayesian decision maker (DM) learns about the biases of novel information sources to predict a random state. Absent frictions, the DM uses familiar sources as yardsticks to accurately discern the biases of novel sources. We derive the distortion of the DM's long-run prediction when he holds misspecified beliefs about the biases of several familiar sources. The distortion aggregates misspecifications across familiar sources independently of the number and nature of the novel sources the DM learns about. This has implications for labor market discrimination, media bias, and project finance and oversight.

Date: 2023-09, Revised 2024-09
New Economics Papers: this item is included in nep-mic
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