Censored Beliefs and Wishful Thinking

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Tác giả: Jarrod Burgh, Emerson Melo

Ngôn ngữ: eng

Ký hiệu phân loại: 098.1 Prohibited works

Thông tin xuất bản: 2024

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Bộ sưu tập: Metadata

ID: 201483

Comment: This paper, previously circulated under the title "Wishful Thinking is Risky Thinking: A Statistical-Distance Based Approach,'' has been divided into two separate and complementary works: "Wishful Thinking is Risky Thinking" [arXiv:2307.02422] and "Censored Beliefs and Wishful Thinking."We present a model elucidating wishful thinking, which comprehensively incorporates both the costs and benefits associated with biased beliefs. Our findings reveal that wishful thinking behavior can be characterized as equivalent to superquantile-utility maximization within the domain of threshold beliefs distortion cost functions. By leveraging this equivalence, we establish WT as driving decision-makers to exhibit a preference for choices characterized by skewness and increased risk. Furthermore, we discuss how our framework facilitates the study of optimistic stochastic choice and optimistic risk aversion.
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