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Pre-decisional information acquisition: Why do we pay too much for information? Brief report

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  • Rieger, Marc Oliver
  • Wang, Mei
  • Hausmann, Daniel

Abstract

People tend to acquire more information while making their decisions than a rational and risk-neutral benchmark would predict. We conduct a carefully designed experiment to derive five plausible reasons for pre-decision information overpurchasing. The results show that overpurchasing of information can be almost entirely explained by systematic information processing errors (misestimation or incorrect Bayesian updating), possibly caused by biased intuitive decision processes. Other factors, such as overoptimism about the validity of the new information, risk aversion, ambiguity aversion, and curiosity about (irrelevant) information, play at most a minor role. Our results imply that information overacquisitions are mainly driven by the overestimation of the usefulness of additional information.

Suggested Citation

  • Rieger, Marc Oliver & Wang, Mei & Hausmann, Daniel, 2021. "Pre-decisional information acquisition: Why do we pay too much for information? Brief report," Journal of Economic Psychology, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:joepsy:v:86:y:2021:i:c:s0167487021000477
    DOI: 10.1016/j.joep.2021.102411
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    1. Zhang, Nan & Qin, Botao, 2021. "Do buyers and sellers evaluate air pollution reduction Differently? experimental evidence from China," Journal of Economic Psychology, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Sequential information acquisition; Ambiguity; Bayesian updating; Financial decision-making;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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