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Emotional decision-makers and anomalous attitudes towards information

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  • Francesca Barigozzi
  • Rosella Levaggi

Abstract

We use a simple version of the Psychological Expected Utility Model (Caplin and Leahy, QJE, 2001) to analyze the optimal choice of information accuracy by an individual who is concerned with anticipatory feeling. The individual faces the following trade-off: on the one hand information may lead to emotional costs, on the other the higher the information accuracy, the higher the efficiency of decision-making. We completely and explicitly characterize how anticipatory utility depends on information accuracy, and study the optimal amount of information acquisition. We obtain simple and explicit conditions under which the individual prefers no-information or partial information gathering. We show that anomalous attitudes towards information can be more articulated than previously thought.
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Suggested Citation

  • Francesca Barigozzi & Rosella Levaggi, 2010. "Emotional decision-makers and anomalous attitudes towards information," Journal of Risk and Uncertainty, Springer, vol. 40(3), pages 255-280, June.
    • Handle: RePEc:kap:jrisku:v:40:y:2010:i:3:p:255-280
    DOI: 10.1007/s11166-010-9092-y
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    References listed on IDEAS

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    4. Barigozzi, Francesca & Levaggi, Rosella, 2008. "Emotions in physician agency," Health Policy, Elsevier, vol. 88(1), pages 1-14, October.
    5. Botond Kőszegi, 2006. "Emotional Agency," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 121-155.
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    Cited by:

    1. Linda Thunström & Chian Jones Ritten, 2019. "Endogenous attention to costs," Journal of Risk and Uncertainty, Springer, vol. 59(1), pages 1-22, August.
    2. Linda Thunström & Jonas Nordström & Jason F. Shogren & Mariah Ehmke & Klaas Veld, 2016. "Strategic self-ignorance," Journal of Risk and Uncertainty, Springer, vol. 52(2), pages 117-136, April.
    3. Bardey, David & De Donder, Philippe & Mantilla, César, 2019. "How is the trade-off between adverse selection and discrimination risk affected by genetic testing? Theory and experiment," Journal of Health Economics, Elsevier, vol. 68(C).
    4. David Bardey & Philippe De Donder & César Mantilla, 2014. "Adverse Selection vs Discrimination Risk with Genetic Testing. An Experimental Approach," Documentos CEDE 12341, Universidad de los Andes, Facultad de Economía, CEDE.
    5. Elyès Jouini & Clotilde Napp, 2018. "The Impact of Health-Related Emotions on Belief Formation and Behavior," Theory and Decision, Springer, vol. 84(3), pages 405-427, May.
    6. Bertrand Crettez & Régis Deloche & Marie‐Hélène Jeanneret‐Crettez, 2020. "A demand‐induced overtreatment model with heterogeneous experts," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1713-1733, September.
    7. Johannes Maier & Clemens König, 2016. "A Model of Reference-Dependent Belief Updating," CESifo Working Paper Series 6156, CESifo.
    8. Fels, Markus, 2015. "On the value of information: Why people reject medical tests," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 56(C), pages 1-12.
    9. Ranjan Ram, 2011. "Self Insurance and Insurance Demand under Self-Deception," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 5(2), pages 1-27, July.

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    More about this item

    Keywords

    Decision-making under risk; Psychological expected utility; Information gathering; Bayesian updating; D81; D83;
    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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