Who Opts In?

91 Pages Posted: 17 Apr 2018 Last revised: 21 May 2020

See all articles by Sandro Ambuehl

Sandro Ambuehl

University of Zurich - Department of Economics

Axel Ockenfels

University of Cologne - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Colin Stewart

University of Toronto - Department of Economics

Date Written: May 20, 2020

Abstract

Payments and discounts incentivize participation in many transactions about which people know little, but can learn more --- payments for medical trial participation, signing bonuses for job applicants, or price rebates on consumer durables. Who opts into the transaction when given such incentives? We show theoretically and experimentally that increasing participation payments disproportionately attracts individuals for whom learning about the transaction is harder. These participants decide based on worse information and are more likely to regret their decision ex post. The learning-based selection effect is stronger when information acquisition is more costly. Moreover, it outweighs selection on risk preferences in many of our treatments.

Keywords: experiment, rational inattention, repugnant transactions, incentives

JEL Classification: D01, D63, D83, D91, C91

Suggested Citation

Ambuehl, Sandro and Ockenfels, Axel and Stewart, Colin, Who Opts In? (May 20, 2020). Rotman School of Management Working Paper No. 3154197, Available at SSRN: https://ssrn.com/abstract=3154197 or http://dx.doi.org/10.2139/ssrn.3154197

Sandro Ambuehl (Contact Author)

University of Zurich - Department of Economics ( email )

Z├╝rich
Switzerland

HOME PAGE: http://https://sites.google.com/site/sandroambuehl/home

Axel Ockenfels

University of Cologne - Department of Economics ( email )

Albertus Magnus Platz
Cologne 50923
Germany

HOME PAGE: http://ockenfels.uni-koeln.de/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Colin Stewart

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada

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