Abstract

How do individuals value noisy information that guides economic decisions? In our laboratory experiment, we find that individuals underreact to increasing the informativeness of a signal, thus undervalue high-quality information, and that they disproportionately prefer information that may yield certainty. Both biases are entirely due to non-standard belief updating, rather than due to non-standard risk preferences.

We find that individuals differ consistently in their responsiveness to information - the extent that their beliefs move upon observing signals. Individual parameters of responsiveness to information have out-of-sample explanatory power in two distinct choice environments and are unrelated to proxies for mathematical aptitude.

Materials

Machine-Readable Metadata

This page includes Schema.org ScholarlyArticle JSON-LD and alternate links in the HTML head for Markdown, LaTeX source bundles, Word-source text, and plain text when available.