Information Overload Effects in Sequential Information Acquisition for Investment Decision-Making

Abstract

This paper experimentally investigates structured investment decision-making with sequential information provision. Subjects were asked to rank investment alternatives using a scoring model. A mixed design with information provision as the within-subject variable and initial information load as the between-subjects variable was employed. A computer-based process tracing technology provided insights into the underlying information acquisition process – information cues were covered by boxes for the second step of the decision. Moving the cursor over a box uncovered the information. Duration and frequency of uncovering the different information cues was recorded in a database. The main variables of interest were decision accuracy, decision confidence, and measures characterizing the information acquisition process. The main findings were the following: the amount of information provided in the first step significantly impacted decision accuracy and decision confidence, which decreased for the high initial information load group. In addition, receiving a high number of information cues in the first step led to a reduction in the attention devoted to the information received in the second step. Confirmatory information search behavior could not be observed. Findings help further our understanding on how the amount and timing of information provision impact decision quality and confidence.