Biased beliefs and imperfect information

Eugenio Proto*, Daniel Sgroi

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

1 Citation (Scopus)

Abstract

We perform an experiment designed to assess the accuracy of beliefs about characteristics and decisions. Subjects are asked to declare beliefs typically formed through real world experiences. They are then asked to report beliefs concerning other individuals from the same environment. We test two main hypotheses: (i) whether for items not perfectly observable, individuals suffer from some type of biased beliefs; (ii) whether this bias is reduced when information is more readily available. We find a powerful and ubiquitous bias in perceptions that is “self-centered” in the sense that those at extremes tend to perceive themselves as closer to the middle of the distribution than is the case. This bias does not completely disappear when the information is more readily available. We present evidence from our experiment that limited attention and self-serving deception can provide explanations for this bias and present important economic applications.

Original languageEnglish
Pages (from-to)186-202
Number of pages17
JournalJournal of Economic Behavior and Organization
Volume136
Early online date20 Feb 2017
DOIs
Publication statusPublished - 1 Apr 2017

Structured keywords

  • ECON Microeconomic Theory
  • ECON Applied Economics

Keywords

  • Attitudes
  • Biased beliefs
  • Characteristics
  • Information
  • Self-centered bias

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