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Expectations with Endogenous Information Acquisition: An Experimental Investigation

Author

Listed:
  • Andreas Fuster

    (Swiss National Bank)

  • Ricardo Perez-Truglia

    (UCLA - University of California [Los Angeles] - UC - University of California)

  • Mirko Wiederholt

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Basit Zafar

    (ASU - Arizona State University [Tempe])

Abstract

We use a survey experiment to generate direct evidence on how people acquire and process information. Participants can buy different information signals that could help them forecast future national home prices. We elicit their valuations and exogenously vary the cost of information. Participants put substantial value on their preferred signal and, when acquired, incorporate the signal in their beliefs. However, they disagree on which signal to buy. As a result, making information cheaper does not decrease the cross-sectional dispersion of expectations. We provide a model with costly acquisition and processing of information, which can match most of our empirical results.

Suggested Citation

  • Andreas Fuster & Ricardo Perez-Truglia & Mirko Wiederholt & Basit Zafar, 2022. "Expectations with Endogenous Information Acquisition: An Experimental Investigation," SciencePo Working papers Main hal-03878688, HAL.
    • Handle: RePEc:hal:spmain:hal-03878688
    DOI: 10.1162/rest_a_00994
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03878688
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    More about this item

    Keywords

    Expectations; Experiment; Housing; Information frictions; Rational inattention;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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