Asymmetries in information processing in a decision theory framework

Santos-Pinto, Luís (2003): Asymmetries in information processing in a decision theory framework.

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.

• Item Type: MPRA Paper
• Institution: Universidade Nova de Lisboa
• Language: English
• Keywords: Information Processing; Decision Theory
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines

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