Regret and Information Avoidance

Empirical evidence suggests that individuals selectively avoid information depending on past choices. We address these findings by studying an agent whose choice behavior can be modeled as if she trades off two conflicting effects of information. The first is a psychological cost from the regret about past choices that are revealed to be suboptimal by the information, whereas the second is the instrumental value of information for making better-informed choices in the future. Our main axioms reflect the agent's desire to have fewer options before the arrival of information and to have more options after the arrival of information. We also posit axioms that connect the agent's consumption choice with her information choice. We show that all parameters can be uniquely identified from the choice behavior. We also provide comparative statics on the agent's information aversion attitude.