Attention and Selection Effects

92 Pages Posted: 17 Apr 2018 Last revised: 20 Dec 2018

See all articles by Sandro Ambuehl

Sandro Ambuehl

University of Toronto - Joseph L. Rotman School of Management - Business Economics; University of Toronto at Scarborough - Division of Management

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: April 1, 2018

Abstract

Who participates in transactions when information about the consequences must be learned? Motivated by a standard model of costly information acquisition, we conduct an experiment showing that stronger participation incentives disproportionately attract individuals for whom learning is more difficult. Their decision to participate rests on worse information, rendering ex post regret more likely. The selection effect is stronger in contexts in which information acquisition is generally costlier. Our empirical results obtain both for experimental variation in the costs of information acquisition and for various individual-level measures of information costs. Selection on information costs can be substantially more pronounced than selection on risk preferences.

Keywords: experiment, rational inattention, repugnant transactions, incentives

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

Suggested Citation

Ambuehl, Sandro and Ockenfels, Axel and Stewart, Colin, Attention and Selection Effects (April 1, 2018). 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 Toronto - Joseph L. Rotman School of Management - Business Economics ( email )

Toronto, Ontario M5S 3E6
Canada

HOME PAGE: http://https://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Ambuehl

University of Toronto at Scarborough - Division of Management ( email )

1265 Military Trial
Scarborough, Ontario M1C 1A4
Canada

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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