Paying for confidence: An experimental study of the demand for non-instrumental information
This paper presents experimental evidence that when individuals are about to make a given decision under risk, they are willing to pay for information on the likelihood that this decision is ex-post optimal, even if this information will not affect their decision. Our findings suggest that this demand for non-instrumental information is caused by what we refer to as a "confidence effect": the desire to increase one's posterior belief by ruling out "bad news", even when such news would have no effect on one's decision. We conduct various treatments to show that our subjects' behavior is not likely to be caused by an intrinsic preference for information, failure of backward induction or an attempt to minimize thinking costs.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Caplin, Andrew & Leahy, John, 1997.
"Psychological Expected Utility Theory and Anticipatory Feelings,"
97-37, C.V. Starr Center for Applied Economics, New York University.
- Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory And Anticipatory Feelings," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 55-79, February.
- Botond Kdszegi, 2006. "Emotional Agency," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 121-155, 02.
- Markus K. Brunnermeier & Jonathan A. Parker, 2002.
LSE Research Online Documents on Economics
24954, London School of Economics and Political Science, LSE Library.
- Jonathan Parker & Markus K Brunnermeier, 2002. "Optimal Expectations," FMG Discussion Papers dp434, Financial Markets Group.
- Markus K. Brunnermeier & Jonathan A. Parker, 2004. "Optimal Expectations," NBER Working Papers 10707, National Bureau of Economic Research, Inc.
- Brunnermeier, Markus K & Parker, Jonathan A, 2004. "Optimal Expectation," CEPR Discussion Papers 4656, C.E.P.R. Discussion Papers.
- Jonathan A. Parker & Markus K. Brunnermeier, 2004. "Optimal Expectations," Econometric Society 2004 North American Winter Meetings 426, Econometric Society.
- Markus K. Brunnermeier & Jonathan A. Parker, 2002. "Optimal Expectations," Working Papers 146, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
- David M Kreps & Evan L Porteus, 1978.
"Temporal Resolution of Uncertainty and Dynamic Choice Theory,"
Levine's Working Paper Archive
625018000000000009, David K. Levine.
- Kreps, David M & Porteus, Evan L, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Econometrica, Econometric Society, vol. 46(1), pages 185-200, January.
- Grant, Simon & Kajii, Atsushi & Polak, Ben, 1998.
"Intrinsic Preference for Information,"
Journal of Economic Theory,
Elsevier, vol. 83(2), pages 233-259, December.
- Bogachan Celen & Kyle Hyndman, 2007.
"Endogenous Network Formation in the Laboratory,"
Departmental Working Papers
0701, Southern Methodist University, Department of Economics.
- Grant, S & Kajii, A & Polak, B, 1997.
"Temporal Resolution of Uncertainty and Recursive Non-Expected Utility Models,"
324, Australian National University - Department of Economics.
- Simon Grant & Atsushi Kajii & Ben Polak, 2000. "Temporal Resolution of Uncertainty and Recursive Non-Expected Utility Models," Econometrica, Econometric Society, vol. 68(2), pages 425-434, March.
- Scott, Robert C & Horvath, Philip A, 1980. " On the Direction of Preference for Moments of Higher Order Than the Variance," Journal of Finance, American Finance Association, vol. 35(4), pages 915-19, September.
- Kfir Eliaz & Andrew Schotter, 2007. "Experimental Testing of Intrinsic Preferences for NonInstrumental Information," American Economic Review, American Economic Association, vol. 97(2), pages 166-169, May.
- Ortoleva, Pietro, 2008.
"The Price of Flexibility: Towards a Theory of Thinking Aversion,"
12242, University Library of Munich, Germany.
- Ortoleva, Pietro, 2013. "The price of flexibility: Towards a theory of Thinking Aversion," Journal of Economic Theory, Elsevier, vol. 148(3), pages 903-934.
- Dorothea K¸bler & Georg Weizs”cker, 2004. "Limited Depth of Reasoning and Failure of Cascade Formation in the Laboratory," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 425-441, 04.
- Eliaz, Kfir & Spiegler, Ran, 2006. "Can anticipatory feelings explain anomalous choices of information sources?," Games and Economic Behavior, Elsevier, vol. 56(1), pages 87-104, July.
- Nicholas Barberis & Ming Huang & Richard H. Thaler, 2006. "Individual Preferences, Monetary Gambles, and Stock Market Participation: A Case for Narrow Framing," American Economic Review, American Economic Association, vol. 96(4), pages 1069-1090, September.
- Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:70:y:2010:i:2:p:304-324. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.