Advanced Search
MyIDEAS: Login to save this paper or follow this series

Base-Rate Neglect and Imperfect Information Acquisition

Contents:

Author Info

  • Philipp C. Wichardt
  • Pavlo R. Blavatskyy

Abstract

Base-rate neglect is a robust experimental finding that individuals do not update their prior beliefs according to the Bayes' rule and, typically, underestimate their posterior probabilities. Another empirical finding is that individuals often do not acquire information even when there are no strategic considerations and the cost of new information is justifiable economically. This paper combines these two different fields of research. Specifically, it is demonstrated that base-rate neglect may lead to imperfect information acquisition. An application to the pricing of new financial assets as well as general implications for the socially optimal pricing of information are discussed.

Download Info

If 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.
File URL: http://www.iew.uzh.ch/wp/iewwp233.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 233.

as in new window
Length:
Date of creation:
Date of revision:
Handle: RePEc:zur:iewwpx:233

Contact details of provider:
Postal: Bl├╝mlisalpstrasse 10, CH-8006 Z├╝rich
Phone: +41-1-634 22 05
Fax: +41-1-634 49 07
Email:
Web page: http://www.econ.uzh.ch/
More information through EDIRC

Related research

Keywords: Bayes' rule; base-rate neglect; decision making; information acquisition;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Rotheli, Tobias F., 2001. "Acquisition of costly information: an experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 46(2), pages 193-208, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Fehr, Ernst & Singer, Tania, 2005. "The Neuroconomics of Mind Reading and Empathy," CEPR Discussion Papers 5128, C.E.P.R. Discussion Papers.
  2. Fehr, Ernst & Fischbacher, Urs & Kosfeld, Michael, 2005. "Neuroeconomic Foundations of Trust and Social Preferences," IZA Discussion Papers 1641, Institute for the Study of Labor (IZA).
  3. Falk, Armin & Fehr, Ernst & Zehnder, Christian, 2005. "The Behavioural Effects of Minimum Wages," CEPR Discussion Papers 5115, C.E.P.R. Discussion Papers.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zur:iewwpx:233. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.