The value of information when preferences are dynamically inconsistent

The paper reviews the main findings on individual decision making under time inconsistent preferences, incomplete information, and different learning environments. First, when agents choose whether to learn or not, avoiding costless information can be their optimal strategy. Strategic ignorance predicts a systematic bias in the agents' perceived payoff. Second, when information flows exogenously (as in the literature on investment under uncertainty), agents may undertake irreversible investments anticipating expected losses. Such decisions are taken only as a commitment device against the acquisition of future information undesirable from the current perspective. Furthermore, several equilibria coexist: the agent will succeed in avoiding investments with losses or not depending on the degree of trust on his future behavior. Third, under learning through consumption, abstention can be part of an equilibrium strategy in activities where moderate consumption (if feasible) would yield a higher payoff. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: A12; D81; D83: D92; G39.