The role of anticipated emotions and the value of information in determining sequential search incentives

Abstract

We define a novel information acquisition model that accounts explicitly for the influence of positive and negative anticipated emotions in the evaluation and selection incentives of decision makers (DMs). The model focuses on the value assigned by the DMs to the information being acquired and its capacity to prevent regrettable decisions within a forward-looking sequential environment. We introduce a novel definition of value of information accounting for the two main uses that DMs can derive from it, namely, verifying the optimality or suboptimality of a potential decision and preventing the regret that may arise from a suboptimal decision. In particular, DMs would regret a decision whenever rejecting [accepting] an alternative that should have actually been accepted [rejected]. Our formal information acquisition model allows to account for the subjective relative importance assigned by the DMs to the verification and regret value of information. Moreover, we illustrate how the incentives defining the sequential information retrieval process of DMs are determined by the relative width of the domains on which the different characteristics describing the alternatives are defined. Keywords: Information acquisition, Anticipated emotions, Regret, Value of information, Certainty equivalent