Price as Information

Abstract

This study investigated the influence of incidental search costs on decisions to terminate information acquisition and the valuation of information sources. Participants who paid for information in a sequential hypothesis testing, medical diagnosis task terminated search earlier than those who acquired information without incidental costs. This finding is consistent with research in various search domains that demonstrates the aversive nature of costs. Participants exhibited a preference for highly diagnostic tests over those possessing low diagnosticity when cost distributions required participants to pay the same price to view the outcome of each tests. However, participants showed a preference for tests that were more expensive than their alternatives when costs differed between tests. This finding suggests that incidental costs influence the valuation of an information source during search. Our observation is consistent with a cost-quality substitution heuristic, where acquisition costs become a surrogate for usefulness when estimating the quality of tests.