Timing and skewness of information revelation: Evidence on information structures and compound lotteries

Enrico, Diecidue; Thomas, Langer; Sven, Nolte; Sebastian, Riedmiller; Judith, Schneider

Abstract

In a series of three experiments, we investigate intrinsic preferences for timing and skewness of information resolution in a “compound lottery” (CL) and “information structure” (IS) environment. In the first experiment, we rule out predeterminedness of the outcome, i.e., realization before making the decision, as a driver of different timing preferences between the environments. In the second experiment, we show that skewness preferences in a two-outcome setting differ between the two environments. In the third comprehensive experiment, we integrate all three dimensions (timing, skewness, and environment) into a three-outcome setting, which allows a rigorous treatment of skewness. With respect to timing, participants prefer to receive information early in both environments. In case of a gradual resolution, participants strictly prefer positively skewed information in the IS environment, but symmetric information in the CL environment. Our results show that skewness and environment must be jointly taken into account when studying preferences for information resolution.