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Do Institutions Promote Rationality? An Experimental Study of the Three-Door Anomaly

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  • Tilman Slembeck

    ()

  • Jean-Robert Tyran

    ()

Abstract

The three-door problem is an astounding example of a systematic violation of a key rationality postulate. In this seemingly simple individual decision task, most people initially fail to correctly apply Bayes’ Law, and to make the payoff-maximizing choice. Previous experimental studies have shown that individual learning reduces the incidence of irrational choices somewhat, but is far from eliminating it. We experimentally study the roles of communication and competition as institutions to mitigate the choice anomaly. We show that the three-door anomaly can be entirely eliminated by these institutions.

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Bibliographic Info

Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2002 with number 2002-21.

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Length: 36 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:usg:dp2002:2002-21

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Keywords: Bayes’ Law; learning; competition; communication; individual decision making; group decision making.;

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  9. David V. Budescu & Boris Maciejovsky, . "Reasoning and Institutions: Do Markets Facilitate Logical Reasoning in the Wason Selection Task?," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2003-04, Max Planck Institute of Economics, Strategic Interaction Group.
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Citations

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Cited by:
  1. Ernst Fehr & Jean-Robert Tyran, 2005. "Individual Irrationality and Aggregate Outcomes," Discussion Papers 05-09, University of Copenhagen. Department of Economics.
  2. Kim Kaivanto & Eike B. Kroll & Michael Zabinski, 2014. "Bias-Trigger Manipulation and Task-Form Understanding in Monty Hall," Economics Bulletin, AccessEcon, vol. 34(1), pages 89-98.
  3. Kling, Catherine Louise, 2012. "From Exxon to BP: Has Some Number Become Better than No Number?," Staff General Research Papers 35576, Iowa State University, Department of Economics.
  4. Morton, Rebecca & Piovesan, Marco & Tyran, Jean-Robert, 2012. "The Dark Side of the Vote: Biased Voters, Social Information, and Information Aggregation Through Majority Voting," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9098, C.E.P.R. Discussion Papers.
  5. David V. Budescu & Boris Maciejovsky, 2004. "The Effect of Monetary Feedback and Information Spillovers on Cognitive Errors: Evidence from Competitive Markets," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2004-32, Max Planck Institute of Economics, Strategic Interaction Group.
  6. Engelmann, Dirk & Strobel, Martin, 2012. "Deconstruction and reconstruction of an anomaly," Games and Economic Behavior, Elsevier, Elsevier, vol. 76(2), pages 678-689.
  7. Francesco Feri & Bernd Irlenbusch & Matthias Sutter, 2008. "Efficiency Gains from Team-Based Coordination ? Large-Scale Experimental Evidence," Working Papers 2008-22, Faculty of Economics and Statistics, University of Innsbruck.
  8. Patt, Anthony G. & Bowles, Hannah Riley & Cash, David W., 2006. "Mechanisms for Enhancing the Credibility of an Adviser: Prepayment and Aligned Incentives," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp06-010, Harvard University, John F. Kennedy School of Government.
  9. Schlapfer, Felix & Schmitt, Marcel, 2007. "Anchors, endorsements, and preferences: A field experiment," Resource and Energy Economics, Elsevier, Elsevier, vol. 29(3), pages 229-243, September.
  10. Brain Kluger & Daniel Friedman, 2006. "Financial Engineering and Rationality: Experimental Evidence Based on the Monty Hall Problem," Labsi Experimental Economics Laboratory University of Siena, University of Siena 007, University of Siena.
  11. David V. Budescu & Boris Maciejovsky, . "Reasoning and Institutions: Do Markets Facilitate Logical Reasoning in the Wason Selection Task?," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2003-04, Max Planck Institute of Economics, Strategic Interaction Group.
  12. Schläpfer, Felix & Schmitt, Marcel & Roschewitz, Anna, 2008. "Competitive politics, simplified heuristics, and preferences for public goods," Ecological Economics, Elsevier, Elsevier, vol. 65(3), pages 574-589, April.
  13. Andrea Morone & Annamaria Fiore, 2007. "Monty Hall's Three Doors for Dummies," series 0012, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Feb 2007.

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