Quotation Hajdu, Gergely, Krusper, Balázs. 2021. How Does Choice Affect Learning? Young Economists' Meeting, Brno, Czech Republic, 02.09.-03.09.


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Abstract

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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title How Does Choice Affect Learning?
Event Young Economists' Meeting
Year 2021
Date 02.09.-03.09.
Country Czech Republic
Location Brno

Associations

People
Hajdu, Gergely (Details)
External
Krusper, Balázs (Central European University, Austria)
Organization
Department of Economics (Sausgruber) (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5339 Economic analyses (Details)
5407 Ethics and social sciences (Details)
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