Shunning uncertainty: The neglect of learning opportunities
Financial, 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. They forgo significant expected payoffs when they shun uncertain alternatives in favor of known ones. Worse, when information is revealed, many make choices contrary to learning. Priming with optimal strategies offers little improvement. Such decision makers violate identified requirements for making rational decisions.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rick, Scott & Weber, Roberto A., 2010. "Meaningful learning and transfer of learning in games played repeatedly without feedback," Games and Economic Behavior, Elsevier, vol. 68(2), pages 716-730, March.
- Mohammed Abdellaoui & Han Bleichrodt & Corina Paraschiv, 2007.
"Loss Aversion Under Prospect Theory: A Parameter-Free Measurement,"
INFORMS, vol. 53(10), pages 1659-1674, October.
- H. Bleichrodt & C. Paraschiv & Mohammed Abdellaoui, 2007. "Loss Aversion Under Prospect Theory: A Parameter-Free Measurement," Post-Print hal-00457047, HAL.
- Corazzini, Luca & Greiner, Ben, 2007.
"Herding, social preferences and (non-)conformity,"
Elsevier, vol. 97(1), pages 74-80, October.
- Liu, Hsin-Hsien & Colman, Andrew M., 2009. "Ambiguity aversion in the long run: Repeated decisions under risk and uncertainty," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 277-284, June.
- Kaivanto, Kim & Kroll, Eike Benjamin, 2011.
"Negative recency, randomization device choice, and reduction of compound lotteries,"
Working Paper Series in Economics
22, Karlsruhe Institute of Technology (KIT), Department of Economics and Business Engineering.
- Kaivanto, Kim & Kroll, Eike B., 2012. "Negative recency, randomization device choice, and reduction of compound lotteries," Economics Letters, Elsevier, vol. 115(2), pages 263-267.
- Richard G. Frank & Richard J. Zeckhauser, 2007.
"Custom Made Versus Ready to Wear Treatments; Behavioral Propensities in Physician's Choices,"
NBER Working Papers
13445, National Bureau of Economic Research, Inc.
- Frank, Richard G. & Zeckhauser, Richard J., 2007. "Custom-made versus ready-to-wear treatments: Behavioral propensities in physicians' choices," Journal of Health Economics, Elsevier, vol. 26(6), pages 1101-1127, December.
- Mirman, L.J. & Samuelson, L. & Urbano, A., 1989.
8-89-7, Pennsylvania State - Department of Economics.
- Yoram Halevy, 2007.
"Ellsberg Revisited: An Experimental Study,"
Econometric Society, vol. 75(2), pages 503-536, 03.
- Charness, Gary & Levin, Dan, 2003.
"When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect,"
University of California at Santa Barbara, Economics Working Paper Series
qt7g63k28w, Department of Economics, UC Santa Barbara.
- Gary Charness & Dan Levin, 2005. "When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect," American Economic Review, American Economic Association, vol. 95(4), pages 1300-1309, September.
- Kristoffer Eriksen & Ola Kvaløy, 2010. "Do financial advisors exhibit myopic loss aversion?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 24(2), pages 159-170, June.
- Uzi Segal, 2000.
"Two Stage Lotteries Without the Reduction Axiom,"
Levine's Working Paper Archive
7599, David K. Levine.
- Marco Scarsini & Alfred Muller, 2002.
"Even Risk-Averters May Love Risk,"
- Rasmusen, Eric, 2010.
"Career concerns and ambiguity aversion,"
Elsevier, vol. 108(2), pages 175-177, August.
- Sanford J. Grossman & Richard E. Kihlstrom & Leonard J. Mirman, 1977. "A Bayesian Approach to the Production of Information and Learning By Doing," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 533-547.
- Hirshleifer, David & Teoh, Siew Hong, 2008.
"Thought and Behavior Contagion in Capital Markets,"
9142, University Library of Munich, Germany.
- Merlo, A. & Schotter, A., 1995.
"A Surprise-Quiz View of Learning in Economic Experiments,"
95-32, C.V. Starr Center for Applied Economics, New York University.
- Merlo, Antonio & Schotter, Andrew, 1999. "A Surprise-Quiz View of Learning in Economic Experiments," Games and Economic Behavior, Elsevier, vol. 28(1), pages 25-54, July.
- Charness, Gary B & Karni, Edi, 2007.
"Individual and Group Decision Making Under Risk: An Experimental Study of Bayesian Updating and Violations of First-order Stochastic Dominance,"
University of California at Santa Barbara, Economics Working Paper Series
qt4gr7j8z8, Department of Economics, UC Santa Barbara.
- Gary Charness & Edi Karni & Dan Levin, 2007. "Individual and group decision making under risk: An experimental study of Bayesian updating and violations of first-order stochastic dominance," Journal of Risk and Uncertainty, Springer, vol. 35(2), pages 129-148, October.
- Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
- Rosenboim, Mosi & Shavit, Tal & Cohen, Chen, 2013. "Do bidders require a monetary premium for cognitive effort in an auction?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 42(C), pages 99-105.
- Kristoffer W. Eriksen & Ola Kvaløy, 2010. "Myopic Investment Management," Review of Finance, European Finance Association, vol. 14(3), pages 521-542.
When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:79:y:2013:i:c:p:44-55. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.