Working Paper: CEPR ID: DP7415
Authors: Kfir Eliaz; Andrew Schotter
Abstract: This paper presents experimental evidence that when individuals are about to make a given decision under risk, they are willing to pay for information on the likelihood that this decision is ex-post optimal, even if this information will not affect their decision. Our findings suggest that this demand for non-instrumental information is caused by what we refer to as a "confidence effect": the desire to increase one?s posterior belief by ruling out "bad news", even when such news would have no effect on one?s decision. We conduct various treatments to show that our subjects? behavior is not likely to be caused by an intrinsic preference for information, failure of backward induction or an attempt to minimize thinking costs.
Keywords: anticipatory feelings; disjunction effect; noninstrumental information; thinking costs
JEL Codes: C91; D03; D81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| willingness to pay for non-instrumental information (D83) | confidence effect (D83) |
| confidence effect (D83) | willingness to pay for non-instrumental information (D83) |
| state of nature (Q57) | willingness to pay for non-instrumental information (D83) |
| context of decision-making (D70) | willingness to pay for non-instrumental information (D83) |
| preference for ruling out bad news (D81) | willingness to pay for non-instrumental information (D83) |