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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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 Economics; 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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- George Loewenstein, Ted O'Donoghue and Matthew Rabin., 2000.
"Projection Bias in Predicting Future Utility,"
Economics Working Papers
E00-284, University of California at Berkeley.
- George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2001. "Projection Bias in Predicting Future Utility," General Economics and Teaching 0012003, EconWPA.
- Loewenstein, George & O'Donoghue, Ted & Rabin, Matthew, 2002. "Projection Bias in Predicting Future Utility," Working Papers 02-11, Cornell University, Center for Analytic Economics.
- Loewenstein, George & O'Donoghue, Ted & Rabin, Matthew, 2000. "Projection Bias in Predicting Future Utility," Department of Economics, Working Paper Series qt5qh6142m, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Vincent P. Crawford & Miguel A. Costa-Gomes & Nagore Iriberri, 2010. "Strategic Thinking," Levine's Working Paper Archive 661465000000001148, David K. Levine.
- Erik Eyster & Matthew Rabin, 2005.
Econometric Society, vol. 73(5), pages 1623-1672, 09.
- Eyster, Erik & Rabin, Matt, 2002. "Cursed Equilibrium," Department of Economics, Working Paper Series qt6xf4782t, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Eyster, Erik & Rabin, Matthew, 2002. "Cursed Equilibrium," Department of Economics, Working Paper Series qt7p2911dn, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Erik Eyster & Matt Rabin, 2003. "Cursed Equilibrium," Method and Hist of Econ Thought 0303002, EconWPA.
- Dirk Jenter & Fadi Kanaan, 2006.
"CEO Turnover and Relative Performance Evaluation,"
NBER Working Papers
12068, National Bureau of Economic Research, Inc.
- Philippe Jehiel & Frederic Koessler, 2005.
"Revisiting Games of Incomplete Information with Analogy-Based Expectations,"
THEMA Working Papers
2005-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Jehiel, Philippe & Koessler, Frédéric, 2008. "Revisiting games of incomplete information with analogy-based expectations," Games and Economic Behavior, Elsevier, vol. 62(2), pages 533-557, March.
- Philippe Jehiel & Frédéric Koessler, 2006. "Revisiting Games of Incomplete Information with Analogy-Based Expectations," Levine's Bibliography 122247000000000252, UCLA Department of Economics.
- Prendergast, Canice & Topel, Robert H, 1996.
"Favoritism in Organizations,"
Journal of Political Economy,
University of Chicago Press, vol. 104(5), pages 958-78, October.
- Milton Harris & Bengt Holmstrom, 1981.
"A Theory of Wage Dynamics,"
488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Biais, Bruno & Weber, Martin, 2009.
"Hindsight Bias, Risk Perception and Investment Performance,"
Open Access publications from University of Toulouse 1 Capitole
http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Bruno Biais & Martin Weber, 2009. "Hindsight Bias, Risk Perception, and Investment Performance," Management Science, INFORMS, vol. 55(6), pages 1018-1029, June.
- George Loewenstein & Don Moore & Roberto Weber, 2006. "Misperceiving the value of information in predicting the performance of others," Experimental Economics, Springer, vol. 9(3), pages 281-295, September.
- Colin F. Camerer & Teck-Hua Ho & Juin-Kuan Chong, 2004. "A Cognitive Hierarchy Model of Games," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 861-898, August.
- Major, Iván & Kiss, Károly M., 2011. "Regulation of network industries in the European Union and in Central and Eastern Europe," 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues 52194, International Telecommunications Society (ITS).
- David Danz & Frank Hüber & Dorothea Kübler & Lydia Mechtenberg & Julia Schmid, 2013.
"‘I'll do it by myself as I knew it all along’: On the failure of hindsight-biased principals to delegate optimally,"
SFB 649 Discussion Papers
SFB649DP2013-009, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Danz, David & Hüber, Frank & Kübler, Dorothea & Mechtenberg, Lydia & Schmid, Julia, 2013. "'I'll do it by myself as I knew it all along': On the failure of hindsight-biased principals to delegate optimally," Discussion Papers, Research Unit: Market Behavior SP II 2013-203, Social Science Research Center Berlin (WZB).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.