Experimental Investigations of the Role of Information in Economic Choices

Before making a choice, we often have the opportunity to learn more about the options that are available. For example, we can check the characteristics of a product before buying it, or read different newspapers before a political election. Understanding what shapes the demand for information, and its role in the decision process, is important to study economic choices. This dissertation contains three essays in behavioral and information economics that utilize experimental data and modeling to analyze how people choose and use information to make decisions. The first chapter, "Coarse and Precise Information in Food Labeling," uses experimental data to determine whether precise food labels can be more effective and informative than coarse ones. In a preregistered online study conducted on a representative US sample, I manipulate front-of-package labels about foods' calorie content. I find that coarse-categorical labels generate a larger reduction in calories per serving compared to detailed-numerical labels despite providing less information. Choices violate the predictions of Bayesian decision theory, suggesting that consumers are less responsive to detailed information. Results also show that participants prefer coarse labels, suggesting a general preference for simple, easy-to-interpret information. The second chapter, "The Status Quo and Belief Polarization of Inattentive Agents," studies how differences across agents can drive information acquisition and generate polarization. In a rational inattention model, optimal information acquisition and subsequent belief formation depend crucially on the agent-specific status quo valuation. Beliefs can systematically update away from the realized truth and even agents with the same initial beliefs might become polarized. A laboratory experiment confirms the model's predictions about the information acquisition and its effect on beliefs. Differently from the model's predictions, participants display preferences for simple messages that can provide certainty. The third chapter, "Dynamic Information Choice with Biased Information Sources," uses experimental data to study how people decide what kind of information to acquire when they have multiple opportunities to learn. Standard theory predicts that decision makers should collect the stream of information that leads to the maximization of the expected reward from the final choice. An online experiment on sequential information acquisition shows that people systematically deviate from the predictions of the standard normative model. Participants display a certainty-seeking information acquisition behavior and under-respond to the new evidence collected, reviewing rarely their own information acquisition strategy.