Consumers’ use of information intermediaries and the impact on their information search behavior in the financial market

Abstract

An information intermediary is a human or a nonhuman party designed to assist consumers in information processing. The current study identifies factors determining the likelihood of using human information intermediaries and the effects of using information intermediaries on the amount and the pattern of overall information search. The proposed model is built based on a value‐intention framework and tested in the context of financial investment decisions. The results indicate that a low level of perceived expertise in financial management, a large amount of total financial assets, and a high opportunity cost of time enhance the perceived value of information intermediaries, thus increasing the likelihood of using information intermediaries. We also find that the use of information intermediaries is positively associated with the overall extent of information search and influences the likelihood of using other information sources.

Information Searches Development in Investment Decisions

“…505)." In Taylor's (1974) theory of risk-taking in consumer behavior, information search plays a risk-reducing strategy before individuals decide to buy, and receives extensive study in financial domain (Lee & Cho, 2005;Peress, 2004;Taylor & Dunnette, 1974;Yeoh, 2000). Most of these studies focus on using information about the financial product, called digital information here, and seeking advice information.…”

“…In this light, we expect that investors who are more likely to search digital information understand that more digital information is not always better (Thaler, Tversky, Kahneman, & Schwartz, 1997). Based on Shah and Oppenheimer's (2008) effort-reduction framework, people use effort-reducing and simplified methods, for example heuristics (Shah & Oppenheimer, 2008;Simon, 1990) and leverage expertise from experts (Fisher & Statman, 1997;Lee & Cho, 2005), to reduce the complexity of information used to find the needed information easily. Hence we hypothesize:…”

“…They summarize heuristics as "methods that use principles of effort-reduction and simplification." Some financial studies on why people employ heuristics have noted that individuals will suffer from both information overload (Lee & Cho, 2005;Peress, 2004) and investment complexity (Fisher & Statman, 1997;Warren et al, 1990) due to bounded rationality (Simon, 1990). Therefore, investors may employ heuristics as a method to reduce the effort they expend on information processes, such as easy-to-access information (Shah & Oppenheimer, 2008) from attribute substitution (Kahneman & Frederick, 2002).…”

“…Seeking advice, such as from professional financial advisors (Baker & Nofsinger 2002;Shum & Faig, 2006), from friends/relatives (Nagy & Obenberger, 1994;Baker & Nofsinger, 2002), and from magazines/brochures published by financial institutions (Lee & Cho, 2005), is especially necessary since investors now have a greater choice of investment products due to the diversification of financial investments (Warren et al, 1990). Moreover, due to the lack of understanding for various investments, investors may seek advice and education from professional advisors (Fisher & Statman, 1997;Howcorft et al, 2003).…”

“…Research shows the significant effects of information searches on investment decision-making (Peress, 2004;Shum & Faig, 2006). Information on financial measures (Clark-Murphy & Soutar, 2004;Nagy & Obenberger, 1994) and advice seeking information (Baker & Nofsinger, 2002;Lee & Cho, 2005) are two usual studied variables. effects of heuristics on investment decision-making.…”