Year: 2024
Type: preprint
Abstract: 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.
Authors: Burgh, Jarrod, Melo, Emerson
Institutions: Indiana University Bloomington, Indiana University
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4391591781