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Entry and exit decisions under public and private information: an experiment

Author

Listed:
  • Aleksei Chernulich

    (New York University Abu Dhabi)

  • John Horowitz

    (Ball State University)

  • Jean Paul Rabanal

    (University of Stavanger)

  • Olga Rud

    (University of Stavanger)

  • Manizha Sharifova

    (University of the Pacific)

Abstract

We design an experiment to study how reversible entry decisions are affected by public and private payoff disclosure policies. In our environment, subjects choose between a risky payoff, which evolves according to an autoregressive process, and a constant payoff. The treatments vary the information disclosure rule on the risky payoff, such that in the public information treatment the risky payoff is always observable, while in the private information treatment, the risky payoff is observable only to the participants who enter the market. We find that under private information, market entry is higher, which suggests that subjects engage in exploration and place value on information.

Suggested Citation

  • Aleksei Chernulich & John Horowitz & Jean Paul Rabanal & Olga Rud & Manizha Sharifova, 2023. "Entry and exit decisions under public and private information: an experiment," Experimental Economics, Springer;Economic Science Association, vol. 26(2), pages 339-356, April.
    • Handle: RePEc:kap:expeco:v:26:y:2023:i:2:d:10.1007_s10683-022-09764-9
    DOI: 10.1007/s10683-022-09764-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Experiment; Entry and exit decisions; Bandit problems; Information provision; Forecasting;
    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
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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