PPROSPECT – Biases in prospective learning and dynamic choice

Many important economic decisions are made after individuals have had opportunities to acquire information. For example, investors can do research about the fundamentals of companies to estimate their future stock prices; consumers can read reviews before making purchase decisions; managers can experiment with different organizational structures before settling on one. As information acquisition is costly, decision-makers must evaluate its benefit ex ante by engaging in prospective learning, that is, by trying to predict the amount of information they will receive.

PROSPECT aims to investigate experimentally whether individuals are able to correctly assess the benefits of future information acquisition, and to use this information proactively when making dynamic choices. The main objective is to uncover some potential fundamental biases in dynamic decision-making, such as a tendency to acquire too little information and to under-experiment relative to the rational benchmark.

In Part 1, Prof. Le Yaouanq aims to identify biases in prospective learning. The key question is whether individuals are able to correctly forecast the amount of information that a given event reveals. Prof. Le Yaouanq will answer this question using a series of experiments where participants will have to predict the value of real-life, naturalistic information such as financial data.

Part 2 studies how individuals take prospective considerations into account when solving dynamic decision problems. The question is whether individuals acquire the right quantity and the right type of information, when doing so is costly. A series of experiments will investigate this question in various classes of decision problems (active experimentation, information acquisition, allocation of attention to different types of news, dynamic choice with self-control issues).

Funded by the European Union (ERC, PROSPECT, 101169799). Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Research Council Executive Agency. Neither the European Union nor the granting authority can be held responsible for them.

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