Eric Spurlino

In a game with costly information acquisition, the ability of one player to acquire information directly affects her opponent’s incentives for gathering information. Rational inattention theory then posits the opponent’s information-acquisition strategy is a direct function of these incentives. This paper argues that people are cognitively limited in predicting their opponent’s level of information, and hence lack the strategic sophistication that the theory requires. In an experiment involving a real-effort attention task and a simple two-player trading game, I study the ability of subjects to (1) anticipate the information acquisition of opponents in this strategic game, and (2) best respond to this information acquisition when acquiring their own costly information. I study this by exogenously manipulating the difficulty of the attention task for both the player and their opponent. Predictions of behavior are generated by a novel theoretical model in which Level-K agents can acquire information a la rational inattention. I find an out-sized lack of strategic sophistication, driven largely by the cognitive difficulties of predicting opponent information. These results suggest a necessary integration of the theories of rational inattention and costly sophistication in strategic settings.

Previous literature on charitable giving in the field has shown that (1) people give substantially more when asked and (2) people tend to avoid the ask if possible. There are two potential explanations for this behavior: social pressure, and empathy. The social pressure theory posits that people do not enjoy giving, but dislike saying "no". The empathy theory claims that the ask causes people to have more altruistic preferences, and thus people may avoid the ask as a self-control device. To separate these two explanations, I formulate empathy as an effect triggered by the giver seeing the ask itself, and social pressure as triggered by the recipient seeing how the giver responds. I utilize an online lab experiment to separate these two theories and test each directly. In the experiment, subjects are assigned to be either solicitors for an NYC COVID-19 relief fund, or to be attentional donors, with a $10 endowment. Solicitors write messages encouraging their partners to donate to their charity. Via a probabilistic avoidance mechanism, I vary (1) whether donors are shown the message and (2) whether solicitors see how much their donor gives. Subjects choose to avoid social pressure at a much higher rate than empathy. However, subjects give more when exposed to either. Evidence also points to sizable heterogeneity in sensitivity to and avoidance of these two effects.