Simple and Complex Information: Demand, Belief Updating and Decision-Making

Project: Research project

Project Details

Description

Complexity has a profound impact on learning and decision-making. This paper analyzes how complexity of information structures affects belief updating and decision-making. More specifically, I investigate a novel notion of complexity related to the interpretability of information, which is overlooked in the literature.

The complexity of information has become particularly important in recent years. Given that many social issues nowadays are multidimensional, so does the related information. It thus becomes ever more difficult to understand the underlying information structure and interpret information. For example, in the issue of global warming, despite many scientific studies pointing to its impact and scale, understanding and interpreting the results is difficult for laypeople which leads to skepticism and denial (cite{dunlap2013climate}).

The aim of this project is to investigate the impact of the complexity/interpretability of the information structure on the demand for information, belief updating, and decision-making. With a series of experiments, I analyze whether and how much individuals prefer a ``simple'' but noisy information structure over a ``complex'' but informative information structure, which I call an informativeness-complexity trade-off. The trade-off would also imply that individuals tend to pay more attention to simple or easily-interpretable information. I also analyze how the complexity of information structure affects the belief updating and action chosen by individuals, and shed light on the underlying mechanism of the informativeness-complexity trade-off.

In the short run, this project will generate at least one paper to be published in a top international journal in the field of economics as well as several presentations at conferences and seminars. In the longer run this project will have important implications for the literature of information design, advertisement, and persuasion, as it proposes a new characteristic of information structures that affects people's attention and belief formation. Moreover, it will help firms and governments to improve their informational policies to gain attention and maximize their effectiveness.
StatusNot started
Effective start/end date1/01/2531/12/26

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