Learning Direction Theory and the Winner s Curse

Arbeitspapier

We report an experiment on a decision task by SAMUELSON and BAZERMAN (1985). Subjects submit a bid for an item with an unknown value. A winner’s curse phenomenon arises when subjects bid too high and make losses. Learning direction theory can account for this. However, other influences on behaviour can also be identified. We introduce impulse balance theory to make quantitative predictions on the basis of learning direction theory. We also look at monotonic ladder processes. It is shown that for this kind of Markov chains the impulse balance point is connected to the mode of the stationary distribution.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bonn Econ Discussion Papers ; No. 10/2001

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Criteria for Decision-Making under Risk and Uncertainty ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Subject: Experimental economics ; learning ; individual decision making

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Selten, Reinhard ; Abbink, Klaus ; Cox, Ricarda
• Event: Veröffentlichung
• (who): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (where): Bonn
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/78393
• Last update: 10.03.2025, 11:44 AM CET