Information projection: model and applications
AbstractPeople 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 38612.
Date of creation: 2008
Date of revision: 2011
Biased beliefs Hindsight bias Misattribution Monitoring Defensive agency Defensive medicine;
Find related papers by JEL classification:
- D0 - Microeconomics - - General
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D20 - Microeconomics - - Production and Organizations - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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