NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Expectations with Endogenous Information Acquisition: An Experimental Investigation

Andreas Fuster, Ricardo Perez-Truglia, Mirko Wiederholt, Basit Zafar

NBER Working Paper No. 24767
Issued in June 2018, Revised in June 2019
NBER Program(s):Asset Pricing, Monetary Economics

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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Document Object Identifier (DOI): 10.3386/w24767

 
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