The Economics of Curiosity

Abstract

We develop the hypothesis that an individual can get some value of information, even if they do not use the information for his subsequent decision, contrary to the expected utility theory. Curiosity is associated with the direct utility from information and is defined formally by using the concept of entropy. We can measure an agent's curiosity level by the maximum amount of money that he is willing to pay in order to obtain the information thereby reducing the entropy. We test the hypothesis from lab experiments and obtain the empirical evidence that people are actually willing to pay a positive amount of money to obtain payoff-irrelevant information. Also, the comparison of the coefficients of variation for our curiosity measure and the IPI (Imaginal Processes Inventory) curiosity measure which is widely used in psychology suggests that our measure is more informative.

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