IDEAS home Printed from https://ideas.repec.org/a/eee/joepsy/v86y2021ics0167487021000477.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167487021000477
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.joep.2021.102411?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gilliland, Stephen W. & Schmitt, Neal & Wood, Lisa, 1993. "Cost-Benefit Determinants of Decision Process and Accuracy," Organizational Behavior and Human Decision Processes, Elsevier, vol. 56(2), pages 308-330, November.
    2. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    3. Warren J. McIsaac & Cheryl L. Hunchak, 2011. "Overestimation Error and Unnecessary Antibiotic Prescriptions for Acute Cystitis in Adult Women," Medical Decision Making, , vol. 31(3), pages 405-411, May.
    4. Saad, Gad & Russo, J. Edward, 1996. "Stopping Criteria in Sequential Choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 67(3), pages 258-270, September.
    5. Rami Zwick & Amnon Rapoport & Alison King Chung Lo & A. V. Muthukrishnan, 2003. "Consumer Sequential Search: Not Enough or Too Much?," Marketing Science, INFORMS, vol. 22(4), pages 503-519, October.
    6. Newell, Ben R. & Weston, Nicola J. & Shanks, David R., 2003. "Empirical tests of a fast-and-frugal heuristic: Not everyone "takes-the-best"," Organizational Behavior and Human Decision Processes, Elsevier, vol. 91(1), pages 82-96, May.
    7. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    8. repec:cup:judgdm:v:4:y:2009:i:6:p:447-460 is not listed on IDEAS
    9. repec:cup:judgdm:v:3:y:2008:i::p:229-243 is not listed on IDEAS
    10. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    11. Grieco, Daniela & Hogarth, Robin M., 2009. "Overconfidence in absolute and relative performance: The regression hypothesis and Bayesian updating," Journal of Economic Psychology, Elsevier, vol. 30(5), pages 756-771, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    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).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marc Oliver Rieger & Mei Wang & Daniel Hausmann, 2020. "Pre-Decisional Information Acquisition: Do We Pay TooMuch for Information?," Working Paper Series 2020-02, University of Trier, Research Group Quantitative Finance and Risk Analysis.
    2. Itzhak Gilboa & Andrew Postlewaite & Larry Samuelson & David Schmeidler, 2019. "What are axiomatizations good for?," Theory and Decision, Springer, vol. 86(3), pages 339-359, May.
    3. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    4. Iñigo Iturbe-Ormaetxe & Giovanni Ponti & Josefa Tomás, 2016. "Myopic Loss Aversion under Ambiguity and Gender Effects," PLOS ONE, Public Library of Science, vol. 11(12), pages 1-11, December.
    5. Mercè Roca & Robin Hogarth & A. Maule, 2006. "Ambiguity seeking as a result of the status quo bias," Journal of Risk and Uncertainty, Springer, vol. 32(3), pages 175-194, May.
    6. Mohammed Abdellaoui & Horst Zank, 2023. "Source and rank-dependent utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 949-981, May.
    7. Basieva, Irina & Khrennikova, Polina & Pothos, Emmanuel M. & Asano, Masanari & Khrennikov, Andrei, 2018. "Quantum-like model of subjective expected utility," Journal of Mathematical Economics, Elsevier, vol. 78(C), pages 150-162.
    8. Schunk, Daniel, 2009. "Behavioral heterogeneity in dynamic search situations: Theory and experimental evidence," Journal of Economic Dynamics and Control, Elsevier, vol. 33(9), pages 1719-1738, September.
    9. Yehuda Izhakian, 2012. "Ambiguity Measurement," Working Papers 12-01, New York University, Leonard N. Stern School of Business, Department of Economics.
    10. repec:ubc:pmicro:halevy-04-10-29-10-08-43 is not listed on IDEAS
    11. Brian Hill, 2009. "Confidence and ambiguity," Working Papers hal-00489870, HAL.
    12. Gul, Faruk & Pesendorfer, Wolfgang, 2015. "Hurwicz expected utility and subjective sources," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 465-488.
    13. Fox, Craig R. & Weber, Martin, 2002. "Ambiguity Aversion, Comparative Ignorance, and Decision Context," Organizational Behavior and Human Decision Processes, Elsevier, vol. 88(1), pages 476-498, May.
    14. Robin Cubitt & Gijs van de Kuilen & Sujoy Mukerji, 2020. "Discriminating Between Models of Ambiguity Attitude: a Qualitative Test," Journal of the European Economic Association, European Economic Association, vol. 18(2), pages 708-749.
    15. Aurélien Baillon & Zhenxing Huang & Asli Selim & Peter P. Wakker, 2018. "Measuring Ambiguity Attitudes for All (Natural) Events," Econometrica, Econometric Society, vol. 86(5), pages 1839-1858, September.
    16. Haim Levy & Enrico De Giorgi & Thorsten Hens, "undated". "Prospect Theory and the CAPM: A contradiction or coexistence?," IEW - Working Papers 157, Institute for Empirical Research in Economics - University of Zurich.
    17. Richard J. Arend, 2020. "Strategic decision-making under ambiguity: a new problem space and a proposed optimization approach," Business Research, Springer;German Academic Association for Business Research, vol. 13(3), pages 1231-1251, November.
    18. Leitner, Johannes, 2005. "Dilatation monotonous Choquet integrals," Journal of Mathematical Economics, Elsevier, vol. 41(8), pages 994-1006, December.
    19. Jakusch, Sven Thorsten & Meyer, Steffen & Hackethal, Andreas, 2019. "Taming models of prospect theory in the wild? Estimation of Vlcek and Hens (2011)," SAFE Working Paper Series 146, Leibniz Institute for Financial Research SAFE, revised 2019.
    20. Bouchouicha, Ranoua & Martinsson, Peter & Medhin, Haileselassie & Vieider, Ferdinand M., 2017. "Stake effects on ambiguity attitudes for gains and losses," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 83(1), pages 19-35.
    21. Jonathan W. Leland & Mark Schneider, 2016. "Salience, Framing, and Decisions under Risk, Uncertainty, and Time," Working Papers 16-08, Chapman University, Economic Science Institute.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joepsy:v:86:y:2021:i:c:s0167487021000477. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/joep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.