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Decision-making environments in which unboundedly rational decision makers choose to ignore relevant information

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  • Nathan Berg

Abstract

This paper advances the claim that ignoring relevant information is sometimes consistent with good decision making. Although that finding is not new, the argument presented here is. In contrast with bounded rationality models, the decision-making model in this paper presupposes no cognitive constraints or costs associated with processing available information. The paper identifies a class of decision-making environments characterised by asymmetric payoffs and probabilities – a property which gives rise to optimal decision rules that ignore relevant information. In other words, optimal decision procedures used by omniscient agents are sometimes independent of variables that objectively predict future outcomes.

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Bibliographic Info

Article provided by Inderscience Enterprises Ltd in its journal Global Business and Economics Review.

Volume (Year): 7 (2005)
Issue (Month): 1 ()
Pages: 59-73

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Handle: RePEc:ids:gbusec:v:7:y:2005:i:1:p:59-73

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Web page: http://www.inderscience.com/browse/index.php?journalID=168

Related research

Keywords: ignoring information; relevant information; bounded rationality; optimal decision rules; adaptive; behavioural; decision making.;

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Cited by:
  1. Berg, Nathan & Hoffrage, Ulrich, 2010. "Compressed environments: Unbounded optimizers should sometimes ignore information," MPRA Paper 26372, University Library of Munich, Germany.
  2. Oxoby, Robert J., 2007. "The Effect of Incentive Structure on Heuristic Decision Making: The Proportion Heuristic," IZA Discussion Papers 2857, Institute for the Study of Labor (IZA).
  3. repec:clg:wpaper:2007-10 is not listed on IDEAS

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