Information projection: model and applications

Kristof Madarasz

MPRA Paper from University Library of Munich, Germany

Abstract: People exaggerate the extent to which their information is shared with others. This paper introduces the concept of such information projection and provides a simple but widely applicable model. The key application describes a novel agency conflict in a frictionless learning environment. When monitoring with ex post information, biased evaluators exaggerate how much experts could have known ex ante and underestimate experts on average. Experts, to defend their reputations, are too eager to base predictions on ex ante information that substitutes for the information jurors independently learn ex post and too reluctant to base predictions on ex ante information that complements the information jurors independently learn ex post. Instruments that mitigate Bayesian agency conflicts are either ineffective or directly backfire. Limiting monitoring improves efficiency. Applications to defensive medicine are discussed.

Keywords: Biased; beliefs; Hindsight; bias; Misattribution; Monitoring; Defensive; agency; Defensive; medicine (search for similar items in EconPapers)
JEL-codes: D0 D03 D20 D82 D84 D86 (search for similar items in EconPapers)
Date: 2008, Revised 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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