Ambroise Descamps, School of Economics and Finance, Queensland University of Technology and Oxera Consulting LLP; Sebastien Massoni, School of Economics and Finance, Queensland University of Technology; Lionel Page, University of Technology Sydney
Date of publication: March 2019
Working paper number: 04
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. We design a laboratory experiment to study whether human behaviour is able to approximate the optimal solution to this problem. We find that participants deviate from it in a systematic manner: they acquire too much information (when costly) or not enough (when cheap). These deviations costs participants between 10% and 25% of their potential payoffs. With time, participants tend to learn to approximate the optimal strategy.