Doctoral Dissertation Research in Economics: Pay for non-instrumental information: an experimental study

Ohio State University, The, Columbus OH

Investigators

Abstract

Doctoral Dissertation Research in Economics: Pay for non-instrumental information: an experimental study (SES: 1656235) Information plays an important role in economic activities. However, by the standard economic view, any information is valuable only if it improves decision-making. This implies no willingness to pay for non-essential information. Experimental data, however, documents the opposite phenomena. This project tests if demand for such non-essential information diminishes in situations where the best choice satisfies a stronger solution concept in game theory. Accounting for the cognitive cost of reasoning may explain why information that may be non-instrumental in theory might nevertheless be important for less than fully rational players. The results of the proposed study will have fundamental implications for economic theory in general and applications such as disclosure of information in implementing mechanisms or policy implementation. The proposed research is aimed at experimental investigation of willingness to pay for non-instrumental information in games with incomplete information where the optimal strategy is either just dominant strategy or obviously dominant strategy, an even stronger solution concept. The project will address fundamental questions about behavior in games with dominant strategy: Is it costly to figure out dominant strategy when it is not obviously enough, and do cognitive costs associated with such obviousness affect the demand of non-instrumental information? The primary approach of the proposed research manipulates the payoff tables of a one-shot normal form game with incomplete information. In all the treatments, the optimal choice is dominant strategy, but might not be obviously dominant strategy. We ask subjects if they are willing to pay a fee to learn the state of nature or the strategy of the opponent. The information will not change the dominant strategy. However, if subjects have difficulty with dominant strategy because of its un-obviousness, they may be willing to pay for such information when the optimal choice is not obviously dominant strategy. Moreover, if subjects have no other reasons for demanding the information, they should not choose to pay the fee when the optimal choice is already obviously dominant strategy. Following the main experiment, all subjects will be asked to participate in a voting game, proposed by Esponda and Vespa (2014) to tests the subjects? abilities of hypothetical thinking. This additional task allows us to investigate whether the choice of paying for non-instrumental information is related to the subjects? ability in hypothetical reasoning, and to verify whether their failure to recognize dominant strategy but not obviously dominant strategy is consistent across different environments.