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Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model

Xavier Gabaix; David Laibson^{1,2,3,4,5,6,7,8,9,10,11}; Guillermo Moloche; Stephen Weinberg

¹ California Institute of Technology · ² U.S. National Science Foundation · ³ National Bureau of Economic Research · ⁴ Harvard University · ⁵ American Economic Association · ⁶ The Econometric Society · ⁷ Institute on Aging · ⁸ National Institute on Aging · ⁹ Massachusetts Institute of Technology · ¹⁰ University of California, Berkeley · ¹¹ Stanford University

The directed cognition model assumes that agents use partially myopic option-value calculations to select their next cognitive operation. The current paper tests this model by studying information acquisition in two experiments. In the first experiment, information acquisition has an explicit financial cost. In the second experiment, information acquisition is costly because time is scarce. The directed cognition model successfully predicts aggregate information acquisition patterns in these experiments. When the directed cognition model and the fully rational model make demonstrably different predictions, the directed cognition model better matches the laboratory evidence.

DOI

10.1257/000282806779468544

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