Attention and Selection Effects

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

Working Papers from University of Toronto, Department of Economics

Abstract: Who participates in transactions when information about the consequences must be learned? We show theoretically that decision makers for whom acquiring and processing information is more costly not only respond more strongly to changes in incentive payments for participating but also decide to participate based on worse information. With higher payments, the pool of participants consists of a larger proportion of individuals who have a worse understanding of the consequences of their decision. We conduct a behavioral experiment that confirms these predictions, both for experimental variation in the costs of information acquisition and for various measures of information costs, including school grades and cognitive ability. These findings are relevant for any transaction combining a payment for participation with uncertain yet learnable consequences.

Keywords: Experiment; rational inattention; repugnant transactions; incentives (search for similar items in EconPapers)
JEL-codes: C91 D83 D91 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2018-05-25
New Economics Papers: this item is included in nep-exp and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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