Essays in information acquisition and decision-making

Deb, Moumita (2023). Essays in information acquisition and decision-making. University of Birmingham. Ph.D.

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Abstract

This thesis analyses two research questions related to information acquisition and consequent decision-making, using theoretical insights and experimental data.

It is typically assumed that majority voting is an effective way of aggregating information. Chapter 1 asks if this is true when voters first need to acquire information from sources of different quality and cost? The answer to this question may depend on the ‘transparency’ regime in which voting happens, i.e., how much voters know about others’ information choice and content. Theoretically, more transparent regimes should improve effective information aggregation through voting. We construct a model which shows that less transparent regimes can perform equally well if all group-members vote according to the information they receive. However, when less informed members abstain, a Pareto inferior swing voter’s curse (SVC) equilibrium exists. We conduct a lab experiment to test whether players’ choices are consistent with either of these two equilibria. We compare four regimes with varying levels of transparency between subjects. Our results in less transparent regimes are consistent with SVC equilibrium predictions, under which majority voting does not yield efficient outcomes, as it does in more transparent regimes where individuals always vote based on available information. In sum, we present the first experimental evidence regarding the effect of varying levels of transparency, on endogenous information acquisition, voting and payoffs.

Threshold uncertainty has been previously shown to impede the efficient provision of threshold public goods. Chapter 2 asks whether groups perform better when their members reduce uncertainty by acquiring information on the location of the threshold? We conduct an online experiment on threshold public good provision where participants can simultaneously choose to buy private clues about the location of the threshold. Each group contains two low-risk and two high-risk members who differ in their expected loss from failing to reach the threshold. We find that groups reach the threshold less frequently when group members can acquire information than when no information acquisition is possible. We attribute this to low contributions and excessive free riding by those who do not buy information. Further, it is the low-risk members who are disproportionately responsible for this failure of collective action. Our findings show that giving individuals a possibility to learn via private information acquisition can worsen the problem of threshold uncertainty.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):