Shunning Uncertainty: The Neglect of Learning Opportunities
AbstractFinancial, managerial, and medical decisions often involve alternatives whose possible outcomes have uncertain probabilities. In contrast to alternatives whose probabilities are known, these uncertain alternatives offer the benefits of learning. In repeat-choice situations, such learning brings value. If probabilities appear favorable (unfavorable), a choice can be repeated (avoided). In a series of experiments involving bets on the colors of poker chips drawn from bags, decision makers often prove to be blind to the learning opportunities offered by uncertain probabilities. Such decision makers violate rational decision making and forgo significant expected payoffs when they shun uncertain alternatives in favor of risky ones. Worse, when information is revealed, many make choices contrary to learning. A range of factors explain these violations. The results indicate that priming with optimal strategies offers little improvement.
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Bibliographic InfoPaper provided by Harvard Kennedy School of Government in its series Scholarly Articles with number 5347068.
Date of creation: 2011
Date of revision:
Publication status: Published in HKS Faculty Research Working Paper Series
Other versions of this item:
- Trautmann, Stefan T. & Zeckhauser, Richard J., 2013. "Shunning uncertainty: The neglect of learning opportunities," Games and Economic Behavior, Elsevier, vol. 79(C), pages 44-55.
- Trautmann, Stefan T. & Zeckhauser, Richard J., 2011. "Shunning Uncertainty: The Neglect of Learning Opportunities," Working Paper Series rwp11-044, Harvard University, John F. Kennedy School of Government.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-29 (All new papers)
- NEP-CBE-2012-05-29 (Cognitive & Behavioural Economics)
- NEP-EXP-2012-05-29 (Experimental Economics)
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