Individuals’ True and Adopted Type Mismatch: Social Environment Influence as Source of Inefficiency Traps

Thursday 2 May 2013, 1.15PM to 2.15pm

Speaker(s): Ruben Martinez Cardenas, University of York

Abstract: A model of choice is built where the type of the decision maker (DM) matters for how this process takes place, and type is unknown to the DM. DM’s type is determined by Nature and unknown to the DM. Self-Type unawareness starts a type search process in which the DM takes into account the information available in the social environment, net valuation over types, and a subjective threshold; with the result of this process being an adopted type for each DM. This process can result in a final adopted type that may or may not coincide with individual’s true type. Then, choice is modelled in a way such that optimal alternatives lie in opportunity sets determined by the DM’s type, and each DM limits the choice problem to a consideration set formed by the particular adopted type. If type adoption results to be different to the DM true type, suboptimal choices emerge. If this process is generalized, inefficiency traps can appear.

Location: Economics Staff Room (EC/202)

Admission: Economics Thursday Workshop. For Staff and Postgraduate students