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Information Aversion

Author

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  • Andries, Marianne
  • Haddad, Valentin

Abstract

We propose a theory of inattention solely based on preferences, absent cognitive limitations or external costs of information. Under disappointment aversion, agents are intrinsically information averse. In a consumption-savings problem, we study how information averse agents cope with their fear of information, to make better decisions: they acquire information at infrequent intervals only, and inattention increases when volatility is high, consistent with the empirical evidence. Adding state-dependent alerts following sharp downturns improves welfare, despite the additional endogenous information costs. Our framework accommodates a broad range of applications, suggesting our approach can explain many observed features of decision under uncertainty.

Suggested Citation

  • Andries, Marianne & Haddad, Valentin, 2017. "Information Aversion," TSE Working Papers 17-779, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:28621
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    References listed on IDEAS

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    Cited by:

    1. Xavier Gabaix, 2017. "Behavioral Inattention," NBER Working Papers 24096, National Bureau of Economic Research, Inc.
    2. Thomas M. Eisenbach & Martin C. Schmalz, 2015. "Anxiety and pro-cyclical risk taking with Bayesian agents," Staff Reports 711, Federal Reserve Bank of New York, revised 01 Dec 2015.

    More about this item

    JEL classification:

    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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