Pre-decisional information acquisition: Why do we pay too much for information? Brief report

Marc Oliver Rieger, Mei Wang and Daniel Hausmann

Journal of Economic Psychology, 2021, vol. 86, issue C

Abstract: People tend to acquire more information while making their decisions than a rational and risk-neutral benchmark would predict. We conduct a carefully designed experiment to derive five plausible reasons for pre-decision information overpurchasing. The results show that overpurchasing of information can be almost entirely explained by systematic information processing errors (misestimation or incorrect Bayesian updating), possibly caused by biased intuitive decision processes. Other factors, such as overoptimism about the validity of the new information, risk aversion, ambiguity aversion, and curiosity about (irrelevant) information, play at most a minor role. Our results imply that information overacquisitions are mainly driven by the overestimation of the usefulness of additional information.

Keywords: Sequential information acquisition; Ambiguity; Bayesian updating; Financial decision-making (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:86:y:2021:i:c:s0167487021000477

DOI: 10.1016/j.joep.2021.102411

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