Choice-induced Sticky Learning

Gergely Hajdu and Balázs Krusper ()
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Balázs Krusper: Lidl Stiftung & Co. KG

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: Consumers are constantly exposed to new information that compels them to update their beliefs about products, thereby influencing future buying and selling decisions. This process does not simply stop with a product choice. We study how choosing a product affects learning about products in the choice set after the choice has been made. We design an experiment, where we have control over the objective ranking of the options in the choice set. Specifically, participants learn about the fundamental quality of financial investments by observing price changes in multiple rounds. Participants either choose some of the investments themselves (Choice condition) or have some of the investments assigned to them (Allocation condition). We find that learning is stickier after making a choice: participants respond less to price changes in the Choice condition than in the Allocation condition. This result holds for both own and non-owned investments and for both good news and bad news. The effect is unlikely to be driven by attention: we find no difference between the conditions in the amount of attention paid to the investments. We estimate a structural model and show that learning aligns closely with the Bayesian benchmark after exogenous product allocation, while it is too sticky after making a choice. Our model characterizes sticky learning in a tractable way that is easily portable, making it simple to analyze its consequences in other contexts.

Keywords: biased beliefs; attention; sticky learning; choice effect (search for similar items in EconPapers)
JEL-codes: D12 D9 G4 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-cbe, nep-dcm and nep-exp
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Working Paper: Choice-induced Sticky Learning (2023)
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