Paying for Confidence: An Experimental Study of the Demand for Non-Instrumental Information

50 Pages Posted: 8 Sep 2009

See all articles by Kfir Eliaz

Kfir Eliaz

Brown University

Andrew Schotter

New York University (NYU) - Department of Economics

Date Written: August 2009

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, Non-instrumental information, Thinking costs

JEL Classification: C91, D03, D81

Suggested Citation

Eliaz, Kfir and Schotter, Andrew, Paying for Confidence: An Experimental Study of the Demand for Non-Instrumental Information (August 2009). CEPR Discussion Paper No. DP7415, Available at SSRN: https://ssrn.com/abstract=1469914

Kfir Eliaz (Contact Author)

Brown University ( email )

Economics Dept.
Box B
Providence, RI 02912
United States
401-863-2112 (Phone)
401-863-1970 (Fax)

HOME PAGE: http://www.econ.brown.edu/fac/Kfir_Eliaz/

Andrew Schotter

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States
212-998-8909 (Phone)
212-995-4186 (Fax)

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