Emotional Decision-Makers and Anomalous Attitudes towards Information

Francesca Barigozzi and Rosella Levaggi

CHILD Working Papers from CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY

Abstract: We use a simple version of the Psychological Expected Utility Model (Caplin and Leahy, QJE, 2001) to analyze the optimal choice of information accuracy by an individual who is concerned with anticipatory feeling. The individual faces the following trade-off: on the one hand information may lead to emotional costs, on the other the higher the information accuracy, the higher the efficiency of decision-making. We completely and explicitly characterize how anticipatory utility depends on information accuracy, and study the optimal amount of information acquisition. We obtain simple and explicit conditions under which the individual prefers no-information or partial information gathering. We show that anomalous attitudes towards information can be more articulated than previously thought.

Keywords: Psychological expected utility; Information gathering; Bayesian updating (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2008-09
New Economics Papers: this item is included in nep-cta and nep-upt
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Related works:
Journal Article: Emotional decision-makers and anomalous attitudes towards information (2010)
Working Paper: Emotional Decision-Makers and Anomalous Attitudes towards Information (2009)
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