Learning to hesitate

Abstract

We investigate how people make choices when they are unsure about the value of the options they face and have to decide whether to choose now or wait and acquire more information first. In an experiment, we find that participants deviate from optimal information acquisition in a systematic manner. They acquire too much information (when they should only collect little) or not enough (when they should collect a lot). We show that this pattern can be explained as naturally emerging from Fechner cognitive errors. Over time participants tend to learn to approximate the optimal strategy when information is relatively costly.

Costly information acquisition in centralized matching markets

“…The finding of oversearch in low‐cost and undersearch in high‐cost environments is in line with recent findings of Descamps, Massoni, and Page (2021). However, in their experiment undersearch is not due to the equilibrium being a corner solution.…”