Welfare Comparisons for Biased Learning

Mira Frick (), Ryota Iijima () and Yuhta Ishii ()
Additional contact information
Mira Frick: Cowles Foundation, Yale University
Ryota Iijima: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/ryota-iijima

No 2274, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study robust welfare comparisons of learning biases, i.e., deviations from correct Bayesian updating. Given a true signal distribution, we deem one bias more harmful than another if it yields lower objective expected payoffs in all decision problems. We characterize this ranking in static (one signal) and dynamic (many signals) settings. While the static characterization compares posteriors signal-by-signal, the dynamic characterization employs an "efficiency index" quantifying the speed of belief convergence. Our results yield welfare-founded quantifications of the severity of well-documented biases. Moreover, the static and dynamic rankings can conflict, and "smaller" biases can be worse in dynamic settings.

Pages: 43 pages
Date: 2021-02
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d22/d2274.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: Welfare Comparisons for Biased Learning (2021)
Working Paper: Welfare Comparisons for Biased Learning (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:cwl:cwldpp:2274

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().