Information search in judgment tasks: The effects of unequal cue validity and cost

Abstract : The broad question addressed by this research is: How good are humans at balancing the costs and benefits of their information acquisition? Do they buy those, and only those, sources of information whose acquisition cost is outweighed by the improvement in decision quality that their use makes possible? The evidence reported here, together with that reviewed earlier, suggests that the answer is not encouraging. Specifically, the present findings extend those noted earlier in suggesting: (1) That the pattern of overpurchase for low-consequence decisions, and underpurchase for high-consequence decisions, is robust to variation in overall cue validity, as well as to procedural modifications such as manual versus computer-interactive transactions (Experiment 1). (2) That overpurchase is frequently coupled with mispurchase (Experiments 2 & 3). That is, subjects, in addition to buying overall more information than was normatively justified, frequently bought expensive cues when cheap, equally-valid ones were available (Experiment 2), or low-validity cues when higher-validity, equally-costly cues were available (Experiment 3). (3) That subjects perceive equally-valid cues as of differential validity (Experiments 1 & 2), and are able to detect real validity differences between cues reliably only when the differences are large (Experiment 3). Purchase behavior is generally shaped by these perceptions of validity, whether well-founded or not, though the relationship disappears when equally-valid cues are offered at different costs (Experiment 2).