Title
Base rate neglect for the wealth of interacting people Base rate neglect for the wealth of interacting people
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Singapore ,
Subject
Economics
Source (journal)
Advances in complex systems. - Singapore
Volume/pages
13(2010) :5 , p. 607-619
ISSN
0219-5259
ISI
000283075200001
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
Previous research investigating base rate neglect as a bias in human information processing has focused on isolated individuals. This study complements this research by showing that in settings of interacting individuals, especially in settings of social learning, where individuals can learn from one another, base rate neglect can increase a population's welfare. This study further supports the research arguing that a population with members biased by neglecting base rates does not need to perform worse than a population with unbiased members. Adapting the model of social learning suggested by Bikhchandani, Hirshleifer and Welch (The Journal of Political Economy100 (1992) 992-1026) and including base rates that differ from generic cases such as 50-50, conditions are identified that make underweighting base rate information increasing the population's welfare. The base rate neglect can start a social learning process that otherwise had not been started and thus base rate neglect can generate positive externalities improving a population's welfare
E-info
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000283075200001&DestLinkType=RelatedRecords&DestApp=ALL_WOS&UsrCustomerID=ef845e08c439e550330acc77c7d2d848
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000283075200001&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=ef845e08c439e550330acc77c7d2d848
Handle