Who Opts In?

Sandro Ambuehl, Axel Ockenfels and Colin Stewart
Authors registered in the RePEc Author Service: Sandro Ambühl

No 7091, CESifo Working Paper Series from CESifo

Abstract: Payments and discounts incentivize participation in many transactions about which people know little, but can learn more - payments for medical trial participation, signing bonuses for job applicants, or price rebates on consumer durables. Who opts into the transaction when given such incentives? We show theoretically and experimentally that increasing participation payments disproportionately attracts individuals for whom learning about the transaction is harder. These participants decide based on worse information and are more likely to regret their decision ex post. The learning-based selection effect is stronger when information acquisition is more costly. Moreover, it outweighs selection on risk preferences in many of our treatments.

Keywords: rational inattention; incentives; risk preferences; selection effects; cognitive ability (search for similar items in EconPapers)
JEL-codes: D01 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp7091.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7091

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().