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To buy or not to buy: Why do people buy too much information?

Carlo Kraemer () and Martin Weber
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Carlo Kraemer: Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre, Postal: L 5, 2, D-68131 Mannheim

No 02-41, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: Previous studies have shown that individuals acquire an excessive amount of private information if the action space is small and discrete. In this experiment we use a continuous action space to investigate information acquisition. Participants sequentially assess their subjective probability which state of the world occurred at the beginning of a game. They observe the probability assessment of their predecessor and can acquire additional private information at a fixed price. Participants interact with either human or computer simulated players. We find that individuals acquire too many signals and that behavior does not depend on the rationality of other players.

Date: 2002-05-02
Note: Financial support from the Deutsche Forschungsgemeinschaft, grant We 993/7-3 , is gratefully acknowledged.
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