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Rationally Biased Learning

Author

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  • Michel de Lara

    (CERMICS - Centre d'Enseignement et de Recherche en Mathématiques et Calcul Scientifique - ENPC - École des Ponts ParisTech)

Abstract

Humans display a tendency to pay more attention to bad outcomes, often in a disproportionate way relative to their statistical occurrence. They also display euphorism, as well as a preference for the current state of affairs (status quo bias). Based on the analysis of optimal solutions of infinite horizon stationary optimization problems under imperfect state observation, we show that such human perception and decision biases can be grounded in a form of rationality. We also provide conditions (boundaries) for their possible occurence and an analysis of their robustness. Thus, biases can be the product of rational behavior.

Suggested Citation

  • Michel de Lara, 2022. "Rationally Biased Learning," Working Papers hal-01581982, HAL.
    • Handle: RePEc:hal:wpaper:hal-01581982
    Note: View the original document on HAL open archive server: https://hal.science/hal-01581982v3
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    References listed on IDEAS

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    More about this item

    Keywords

    imperfect state information; probability overestimation; euphorism bias; pessimism bias; optimal behavior; status quo bias;
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