Information Projection and Timing Decisions: A Rationale for Second Thoughts

Kohei Daido and Tomoya Tajika

No 238, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: This study develops a dynamic model of information projection and explores how it affects timing of actions. An action is observable and available only after the agents' arrival. The value of an action is unknown; however, each agent receives a noisy signal on its value. Without information projection, if no one has taken action until then, the expected value of taking action reduces with the passage of time because inaction is a bad signal. In contrast, under projection bias, because of which the agent mistakenly believes that the other agent's arrival time is close to theirs, the expected action value may increase as time passes. Consequently, the agent has second thoughts; although they decide not to take action when they find the problem, they overturn their initial decision and take action later.

Keywords: Delay; Information projection bias; Preemption games; Second thoughts; Social learning (search for similar items in EconPapers)
JEL-codes: D81 D82 D83 D91 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2022-08
New Economics Papers: this item is included in nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:238

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