Abstract: This paper presents an experimental study on how people choose sets of information sources (referred to as information bundles). The findings reveal that subjects frequently fail to choose the more instrumentally valuable bundle in binary choices, largely due to the challenge of integrating the information sources within a bundle to identify their joint information content. The mistakes in choices can not be attributed to an inability to use information bundles. Instead, these mistakes are strongly explained by subjects' tendency to follow a simple but imperfect heuristic when valuing them, which I call "common source cancellation (CSC)". The heuristic causes subjects to mistakenly disregard the common information source in two bundles and focus solely on the comparison of the sources that the two bundles do not share. As a result, choices between information bundles are made without adequately considering the joint information content of each bundle. Notably, CSC emerges as a robust explanation for the information bundle choices for all subjects, including those who make perfect use of information bundles to make inferences.

Abstract: We experimentally show that complexity shapes strategy selection in infinitely repeated prisoner's dilemmas in several fundamental ways.  Our subjects choose from a menu of pre-set strategies and we vary whether they have to  (i) implement their chosen strategies themselves, (ii) compute the payoff consequences of those strategies and whether they (iii) face uncertainty about the strategy of their counterpart.  We find that subjects (i) show a strong aversion to implementing algorithmically complex strategies, and moreover (ii) use strategic simplicity as coordination devices (focal points), particularly when faced with the computationally complex task of inferring the payoff consequences of strategies.

Abstract: People often make suboptimal decisions in the context of persuaders' strategic information disclosure, likely resulting from strategic and probabilistic reasoning errors. Building upon the information design framework, we leverage the observation that persuaders' information disclosure can be decomposed into two layers, the selected information structure and a realized signal, and structurally quantify both types of errors that receivers could make based on their elicited beliefs at three stages in the persuasion game. Our experimental findings indicate that strategic and probabilistic reasoning errors are comparable in magnitude, largely orthogonal to each other, and stable across various settings. A key implication is that an improved behavioral theory on this theme should account for both strategic naivete and non-Bayesian updating, without significant concern for their interaction.

Abstract: We experimentally investigate how individuals use and value different statistical characteristics of a set of realized signals, referred to as sample features, in the classic belief updating task. We find that both the valuation and the realized usefulness of sample features do not monotonically respond to the changes in instrumental value (informativeness) across sample features. Subjects prefer sample features that contain proportion (the relative frequency of realized outcomes) over those that do not. Their belief updating behaviors align most closely with the Bayesian benchmark when using proportion, despite it not being the most informative one. Combining preference and belief updating performance, we show that, on average, subjects make better use of the sample features they prefer. Taken together, our findings shed light on the association between the preference of sample features and errors in belief updating in the classic experimental setting of studying belief updating behaviors.

Abstract: We explore theoretically and experimentally whether information design can be used by trustees as a signaling device to boost trusting acts. In our main setting, a trustee partially or fully decides a binary payoff allocation and designs an information structure; then a trustor decides whether to invest. In the control setting, information design is not available. In line with the standard equilibrium analysis, we find that introducing information design increases trustworthiness and trusting acts, and some trustees choose full trustworthiness with the most informative structure. We also find systematic behavioral deviations, including some trustees' choosing zero trustworthiness with the least informative structure and trustors' overtrusting in low informative structures. We finally provide a model of heterogeneity in prosociality and strategic sophistication, which rationalizes the experimental findings.