Does free information provision crowd out costly information acquisition? It’s a matter of timing
Authors
Aycinena, Diego
Elbittar, Alexander
Gomberg, Andrei
Rentschler, Lucas
Editor
Publication date
2020-10-09
Document language
eng
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Abstract
Conventional wisdom suggests that promising an agent free information would crowd out costly information acquisition. We theoretically demonstrate that this intuition only holds as a knife-edge case where priors are symmetric. For asymmetric priors, agents are predicted to increase their information acquisition when promised free information in the future. We test in the lab whether such crowding out occurs for both symmetric and asymmetric priors. We find theoretical support for the predictions: when priors are asymmetric, the promise of future “free” information induces subjects to acquire costly information which they would not be acquiring otherwise.
Description
Códigos JEL
C91 - Laboratory, Individual Behavior, D80 - Information, Knowledge, and Uncertainty: General, C44 - Operations Research; Statistical Decision Theory
item.page.subjectjelspa
Keywords
Information acquisition, Rational ignorance, Experiments
