Working paper

Information Aversion

Marianne Andries, and Valentin Haddad

Abstract

We propose a theory of inattention solely based on preferences, absent cognitive limitations or external costs of information. Under disappointment aversion, agents are intrinsically information averse. In a consumption-savings problem, we study how information averse agents cope with their fear of information, to make better decisions: they acquire information at infrequent intervals only, and inattention increases when volatility is high, consistent with the empirical evidence. Adding state-dependent alerts following sharp downturns improves welfare, despite the additional endogenous information costs. Our framework accommodates a broad range of applications, suggesting our approach can explain many observed features of decision under uncertainty.

Replaced by

Marianne Andries, and Valentin Haddad, Information Aversion, Journal of Political Economy, 2019, forthcoming.

Reference

Marianne Andries, and Valentin Haddad, Information Aversion, TSE Working Paper, n. 17-779, March 2017.

See also

Published in

TSE Working Paper, n. 17-779, March 2017