Attention and Selection Effects

91 Pages Posted: 17 Apr 2018 Last revised: 25 Apr 2019

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 19, 2019

Abstract

Many transactions involve uncertain but learnable consequences. Who responds more to incentives to participate, individuals who find it easier to learn about consequences or those for whom it is more difficult? We show theoretically and experimentally that incentives disproportionately attract those with high learning costs. These participants’ decisions rest on worse information, rendering ex post regret more likely. Selection based on learning costs is substantially more pronounced than selection on risk preferences in many of our treatments. Our results apply to a wide range of economic transactions and, moreover, highlight a conflict between participation incentives and ethical principles of informed consent.

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 19, 2019). 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

Register to save articles to
your library

Register

Paper statistics

Downloads
245
Abstract Views
1,049
rank
125,633
PlumX Metrics