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Asymmetries in information processing in a decision theory framework

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Author Info
Santos-Pinto, Luís

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Abstract

Research in psychology suggests that some individuals are more sensitive to positive than to negative information while others are more sensitive to negative rather than positive information. I take these cognitive positive-negative asymmetries in information processing to a Bayesian decision-theory model and explore its consequences in terms of decisions and payoffs. I show that in monotone decision problems economic agents with more positive-responsive information structures are always better off, ex-ante, when they face problems where payoffs are relatively more sensitive to the action chosen when the state of nature is favorable.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3146.

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Date of creation: 08 Jan 2003
Date of revision: 27 Apr 2007
Handle: RePEc:pra:mprapa:3146

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Related research
Keywords: Information Processing; Decision Theory.;

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Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines

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  1. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March. [Downloadable!] (restricted)
  2. Jonathan Levin & Susan Athey, 2001. "The Value of Information in Monotone Decision Problems," Working Papers 01003, Stanford University, Department of Economics. [Downloadable!]
    Other versions:
  3. Whitmore, G A, 1970. "Third-Degree Stochastic Dominance," American Economic Review, American Economic Association, vol. 60(3), pages 457-59, June. [Downloadable!] (restricted)
  4. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January. [Downloadable!] (restricted)
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  5. Shannon, Chris, 1995. "Weak and Strong Monotone Comparative Statics," Economic Theory, Springer, vol. 5(2), pages 209-27, March.
  6. Menezes, C & Geiss, C & Tressler, J, 1980. "Increasing Downside Risk," American Economic Review, American Economic Association, vol. 70(5), pages 921-32, December. [Downloadable!] (restricted)
  7. Landsberger, Michael & Meilijson, Isaac, 1990. " A Tale of Two Tails: An Alternative Characterization of Comparative Risk," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 65-82, March.
  8. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September. [Downloadable!] (restricted)
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