Correlation Misperception in Choice

S-Tier
Journal: American Economic Review
Year: 2017
Volume: 107
Issue: 4
Pages: 1264-92

Authors (2)

Score contribution per author:

4.022 = (α=2.01 / 2 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We present a decision-theoretic analysis of an agent's understanding of the interdependencies in her choices. We provide the foundations for a simple and flexible model that allows the misperception of correlated risks. We introduce a framework in which the decision maker chooses a portfolio of assets among which she may misperceive the joint returns, and present simple axioms equivalent to a representation in which she attaches a probability to each possible joint distribution over returns and then maximizes subjective expected utility using her (possibly misspecified) beliefs.

Technical Details

RePEc Handle
repec:aea:aecrev:v:107:y:2017:i:4:p:1264-92
Journal Field
General
Author Count
2
Added to Database
2026-01-25