How Does Choice Affect Learning?

Beschreibung

After purchasing a product, people usually receive information and update their beliefs about both chosen and not chosen products. This, in turn, can affect future buying and selling decisions. In this paper, we study how choosing a product — as opposed to simply receiving it —affect learning (i.e. belief updating) about products after the choice has been made. We design an experiment where participants learn about the fundamental quality of financial investments by observing price changes in multiple rounds. Using a between-subject design, we compare beliefs of participants who choose some of the investments themselves (Choice condition) to participants who receive investments exogenously (Allocation condition). We find a choice effect, participants react weaker to price changes in the Choice condition than in the Allocation condition. We argue that participants in the Choice condition trust their previous beliefs more and therefore react less to recent price changes. We build and estimate a structural model and find that participants in the Choice condition put higher weight on previous beliefs compared to recent information. In light of these results, we can reject other potential explanations to be the main drivers of a choice effect such as motivated belief formation or increased attention.

Zeitraum	2 Sept. 2021 → 3 Sept. 2021
Ereignistitel	Young Economists' Meeting
Veranstaltungstyp	Keine Angaben
Bekanntheitsgrad	International