Economics Webinar - Boundedly Rational Information Demand

Acquiring information about available options before making a decision is useful because it allows decision makers to switch to a superior alternative if the default option is deemed inferior. Therefore, information demand should depend on the distribution of the options’ values.  In an experiment, I show that information demand increases as the default worsens, while, on average, it remains insensitive to the prior value of the alternative. These patterns reflect bounded rationality in information valuation, which stems from the difficulty of foreseeing future choices and integrating their payoffs.