12 Sep 2017Working Paper Summaries

The Better is the Enemy of the Good

by Christine L. Exley and Judd B. Kessler

Previous research has shown that individuals’ self-serving responses to information may arise when payoff information is subjective or uncertain. This study, in the context of charitable giving, shows that individuals’ ability to respond to payoff information in a self-serving way even includes situations when information is complete and certain.

Author Abstract

In standard economic theory, information helps agents optimize. But providing agents with information about the benefits of an action often fails to encourage that action. This paper proposes a far-reaching behavioral explanation: information may make salient that the benefits of taking an action could be improved and agents may see the potential for improvement as a reason to avoid the action. In an experiment, making more salient how a donation could be improved significantly decreases giving. Self-serving motives dramatically magnify the effect, suggesting why information may be particularly ineffective at encouraging privately costly actions with social or future benefits.