# Belief Updating and the Demand for Information

Authors: Sandro Ambuehl; Shengwu Li
Venue: Games and Economic Behavior, 2018, 109: 21-39
Year: 2018
Source: https://www.sciencedirect.com/science/article/abs/pii/S0899825617302191
PDF: https://sandroambuehl.com/assets/papers/belief-updating-demand-information.pdf
Plain text version: https://sandroambuehl.com/assets/plain-text/belief-updating-demand-information.tex
LaTeX source bundle: https://sandroambuehl.com/assets/plain-text/belief-updating-demand-information.tex
Appendix: https://sandroambuehl.com/assets/papers/belief-updating-demand-information-appendix.pdf

## 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.

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