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A Categorical Model of Cognition and Biased Decision Making

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Author Info
Roland Fryer (Harvard University)
Matthew Jackson (Stanford University)

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Abstract

There is a wealth of research demonstrating that agents process information with the aid of categories. In this paper we study this phenomenon in two parts. First, we build a model of how experiences are sorted into categories and how categorization affects decision making. Second, in a series of results that partly characterize an optimal categorization, we show that specific biases emerge from categorization. For instance, types of experiences and objects that are less frequent in the population tend to be more coarsely categorized and lumped together. As a result, decision makers make less accurate predictions when confronted with such objects. This can result in discrimination against minority groups even when there is no malevolent taste for discrimination. However, such comparative statics are highly sensitive to the particular situation; optimal categorizations can change in surprising ways. For instance, increasing a group's population, holding all else constant, can lead a decision maker to make less accurate predictions about that group.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Contributions to Theoretical Economics.

Volume (Year): 8 (2008)
Issue (Month): 1 ()
Pages: 1357-1357
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Handle: RePEc:bep:thecon:v:8:y:2008:i:1:p:1357-1357

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Related research
Keywords: categorization categories identification discrimination decision making

Find related papers by JEL classification:
D10 - Microeconomics - - Household Behavior - - - General

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  1. Joel L. Schrag, 1999. "First Impressions Matter: A Model Of Confirmatory Bias," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 37-82, February. [Downloadable!] (restricted)
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  3. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-71, June. [Downloadable!] (restricted)
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  5. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August. [Downloadable!] (restricted)
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  6. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August. [Downloadable!] (restricted)
  7. Phipps Arabie, 1991. "Was euclid an unnecessarily sophisticated psychologist?," Psychometrika, Springer, vol. 56(4), pages 567-587, December. [Downloadable!] (restricted)
  8. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September. [Downloadable!] (restricted)
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  10. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, vol. 114(1), pages 1-30, January. [Downloadable!] (restricted)
  11. Roland G. Fryer & Steven D. Levitt, 2004. "Understanding the Black-White Test Score Gap in the First Two Years of School," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 447-464, 06. [Downloadable!] (restricted)
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