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More Effort with Less Pay: On Information Avoidance, Optimistic Beliefs, and Performance

More Effort with Less Pay: On Information Avoidance, Optimistic Beliefs, and Performance
Author:

Steffen Huck, Nora Szech and Lukas Wenner

links:
Date: August 17, 2017

Recent behavioral models argue in favor of avoidance of instrumental information. We explore the role of information avoidance in a real-effort setting. Our experiment offers three main results. First, we confirm that preferences for avoidance of instrumental information exist, studying information structures on performance pay. Second, information avoiders outperform information receivers. This result holds independently of effects of self-selection. Third, the findings support theories on information avoidance that favor an optimistic belief design, such as Brunnermeier and Parker (2005), instead of a Bayesian rational approach such as B´enabou and Tirole (2002). Subjects do not stick to their Bayesian expectations, but bias them optimistically under coarse information.