Information aggregation with costly information and random ordering : experimental evidence

Kraemer, Carlo ; Nöth, Markus ; Weber, Martin

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URN: urn:nbn:de:bsz:180-madoc-28249
Document Type: Working paper
Year of publication: 2000
The title of a journal, publication series: None
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: D8 C92 ,
Subject headings (SWD): Informationsverhalten , Mikroökonomie , Verhalten , Informationskosten , Entscheidung bei Unsicherheit
Keywords (English): information aggregation , information acquisition , Bayes’ rule , heuristics
Abstract: The cost of information is an often ignored factor in economic situations although the information acquisition behavior of the decision makers has a crucial influence on the outcome. In this experiment, we study an information aggregation process in which participants decide in a random sequence. Participants observe predecessors decisions and can acquire additional private information at a fixed price. We analyze participants information acquisition behavior and updating procedures. About one half of the individuals act rationally, whereas the other participants systematically overestimate the private signal value. This leads to excessive signal acquisitions and reduced conformity.
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