Preparing to Act: Information Acquisition and the Timing of Actions (Online Appendix)
[Revise and Resubmit, Econometrica]
This paper develops a dynamic model of information acquisition in which the decision maker lacks control over the timing of her action. Dynamic experiments are constrained only in the quantity of information they can generate over any time interval. At the optimum, the decision maker concentrates resources in seeking a single piece of breakthrough evidence falsifying the current plan of action. Whenever the decision maker fails to obtain this evidence she becomes more confident in her intended action. Moreover, the arrival of breakthroughs leaves (shadow) costs unchanged. These features reveal three key motives driving the decision maker: a desire to hedge against the failure to obtain breakthroughs, the cost efficiency of the experiment, and a need to expedite the falsification of current plans.