Abstract:
This paper explores how information campaigns can counteract inefficient choices in a learning setting with social perception bias. Individuals learn from private information and the outcomes of others, and a social planner can release costly information about the state. We model social perception biases as misspecified model of others' preferences. When individuals systematically overestimate the similarity between their own preferences and the preferences of others -- exhibiting the false consensus effect -- this can lead to incorrect learning, while when individuals systematically underestimate this similarity -- exhibiting pluralistic ignorance -- this can prevent beliefs from converging. We characterize how the type and level of social perception bias affects the optimal information policy, and show that the duration -- temporary or permanent -- and target -- intervene to correct inefficient action choices or to reinforce efficient action choices -- of the optimal information campaign depend crucially on the form of misspecification. We close with an application in which individuals misunderstand other individuals' risk preferences.
For more information and to receive a Zoom link for this event, please contact Erik Madsen (emadsen@nyu.edu).