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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Base-Rate Neglect and Imperfect Information Acquisition |
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| Authors |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 233 |
| ISSN | 1424-0459 |
| Date | 2005 |
| Abstract Text | 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 justifiableneconomically. This paper combines these two different fields of research. Specifically, it is demonstrated that base-rate neglect may lead to imperfectninformation acquisition. An application to the pricing of new financial assets as well as general implications for the socially optimal pricing of information are discussed. |
| Official URL | http://www.econ.uzh.ch/wp.html |
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