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Precision May Harm : The Comparative Statics of Imprecise Judgement

Author

Listed:
  • Sean HORAN
  • Paola MANZINI
  • Marco MARIOTTI

Abstract

We consider an agent whose information about the objects of choice is imperfect in two respects: first, their values are perceived with error; and, second, the realised values cannot be discriminated with absolute precision . Reasons for imprecise discrimination include limitations in sensory perception, memory function, or the technology that experts use to communicate with decision-makers. We study the effect of increasing precision on the quality of decision-making. When values are perceived without error, more precision is unambiguously beneficial. We show that this ceases to be true when values are perceived with error. As a practical implication, our results establish conditions where it is counter-productive for an expert to use a finer signalling scheme to communicate with a decision-maker.

Suggested Citation

  • Sean HORAN & Paola MANZINI & Marco MARIOTTI, 2018. "Precision May Harm : The Comparative Statics of Imprecise Judgement," Cahiers de recherche 16-2018, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    • Handle: RePEc:mtl:montec:16-2018
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    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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