Masaryk University Economic Seminars

Base-rate neglect—the failure of posterior beliefs to fully incorporate prior probabilities—is one of the most robust deviations from Bayesian updating. We argue that the literature has largely conflated two distinct psychological mechanisms that can generate this pattern. The first is the fallacy of the uniform prior (FUP), whereby individuals update as if the prior were uniform. The second is the fallacy of the transposed conditional (FTC), whereby individuals treat the precision of a signal as if it were the posterior probability. While both mechanisms imply base-rate neglect, they map information into beliefs in fundamentally different ways. We show that they are observationally equivalent under symmetric information structures, which dominate existing designs, but diverge under asymmetry. We develop a framework that nests both mechanisms and an experimental design that identifies them empirically.

Ro'i Zultan is a professor at the Department of Economics at Ben-Gurion University of the Negev and the director of the Negev Experimental Economics Laboratory. He is an experimental economist with a background in cognitive and experimental psychology. His research focuses on understanding how group dynamics influence cognition and behavior, as well as on broader questions of cooperation, coordination, and decision-making in teams. He is also interested in game theory, market efficiency, ethics, and the methodological foundations of experimental research.

Sign up for a 1-to-1 meeting with Ro'i: https://is.muni.cz/tudle/ailg
Sign up for the social dinner: https://is.muni.cz/tudle/feck

How does tax progressivity alter the macroeconomic impact of carbon revenue recycling? This talk examines the interplay between labor tax progressivity and carbon revenue recycling through an Environmental Two-Agent New Keynesian (TANK) DSGE model. By evaluating lump-sum transfers, capital tax cuts, and broad versus targeted labor tax cuts across low- and high-income households, our study reveals trade-offs between economic output and distributional equity. The results show that targeted low-income labor tax cuts effectively reconcile growth with equity, while demonstrating how baseline tax progressivity serves dual functions as a powerful incentive multiplier and an automatic dynamic stabilizer against carbon-shock downturns.