NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Mirko Wiederholt

Professor of Economics
Sciences Po, Paris
28 rue des Saints Peres
75007 Paris
France

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Sciences Po, Paris

NBER Working Papers and Publications

June 2018Expectations with Endogenous Information Acquisition: An Experimental Investigation
with Andreas Fuster, Ricardo Perez-Truglia, Basit Zafar: w24767
We use a survey experiment to generate direct evidence on how people acquire and process information. Participants can buy different information signals that could help them forecast the future median national home price. Participants put substantial value on their preferred signal and, when acquired, use the signal in the formation of their expectations. However, they disagree on which signal to buy. As a result, making information cheaper does not decrease the cross-sectional dispersion of expectations. We provide a model with costly acquisition and processing of information, and show that it can match almost all of our empirical results.
 
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