IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v46y2025i8p4335-4346.html

Information and Investor Behavior in the Acquiring‐a‐Company Game

Author

Listed:
  • Mengmeng Shi
  • Shaohui Wu
  • Hang Wu

Abstract

This paper reports an experimental study examining decision‐making biases in the acquiring‐a‐company (AC) game. We examine investment behavior across 40 rounds of the AC game under conditions of risk and ambiguity. Initial experimental phases reveal participant decisions consistent with ambiguity‐seeking behavior: Investors in the ambiguity scenario submit significantly greater prices than those in the risk scenario. For the first 20 rounds of the experiment, we observe radical price adjustments towards the optimal choice in both scenarios; and the price difference between the two scenarios declines as the experiment proceeds. Interestingly, gambler's fallacy has a remarkable influence on investors' dynamic bidding behavior.

Suggested Citation

  • Mengmeng Shi & Shaohui Wu & Hang Wu, 2025. "Information and Investor Behavior in the Acquiring‐a‐Company Game," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(8), pages 4335-4346, December.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:8:p:4335-4346
    DOI: 10.1002/mde.70020
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.70020
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.70020?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Alejandro Martínez-Marquina & Muriel Niederle & Emanuel Vespa, 2019. "Failures in Contingent Reasoning: The Role of Uncertainty," American Economic Review, American Economic Association, vol. 109(10), pages 3437-3474, October.
    2. Chen, Yan & Katuscak, Peter & Ozdenoren, Emre, 2007. "Sealed bid auctions with ambiguity: Theory and experiments," Journal of Economic Theory, Elsevier, vol. 136(1), pages 513-535, September.
    3. Yoram Halevy, 2007. "Ellsberg Revisited: An Experimental Study," Econometrica, Econometric Society, vol. 75(2), pages 503-536, March.
    4. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    5. Aurélien Baillon & Zhenxing Huang & Asli Selim & Peter P. Wakker, 2018. "Measuring Ambiguity Attitudes for All (Natural) Events," Econometrica, Econometric Society, vol. 86(5), pages 1839-1858, September.
    6. Aurélien Baillon & Han Bleichrodt, 2015. "Testing Ambiguity Models through the Measurement of Probabilities for Gains and Losses," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 77-100, May.
    7. Stephen G. Dimmock & Roy Kouwenberg & Peter P. Wakker, 2016. "Ambiguity Attitudes in a Large Representative Sample," Management Science, INFORMS, vol. 62(5), pages 1363-1380, May.
    8. repec:aen:journl:1983v04-04-a03 is not listed on IDEAS
    9. Aurélien Baillon & Laure Cabantous & Peter Wakker, 2012. "Aggregating imprecise or conflicting beliefs: An experimental investigation using modern ambiguity theories," Journal of Risk and Uncertainty, Springer, vol. 44(2), pages 115-147, April.
    10. Bose, Subir & Daripa, Arup, 2009. "A dynamic mechanism and surplus extraction under ambiguity," Journal of Economic Theory, Elsevier, vol. 144(5), pages 2084-2114, September.
    11. Walter J. Mead & Asbjorn Moseidjord & Philip E. Sorensen, 1983. "The Rate of Return Earned by Lessees under Cash Bonus Bidding for OCS Oil and Gas Leases," The Energy Journal, , vol. 4(4), pages 37-52, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Jiangyan & Fairley, Kim & Fenneman, Achiel, 2024. "Does it matter how we produce ambiguity in experiments?," MPRA Paper 122336, University Library of Munich, Germany.
    2. Masahide Watanabe & Toshio Fujimi, 2024. "Ambiguity attitudes toward natural and artificial sources in gain and loss domains," Journal of Risk and Uncertainty, Springer, vol. 68(1), pages 51-75, February.
    3. Evren, Özgür, 2019. "Recursive non-expected utility: Connecting ambiguity attitudes to risk preferences and the level of ambiguity," Games and Economic Behavior, Elsevier, vol. 114(C), pages 285-307.
    4. Stephen G. Dimmock & Roy Kouwenberg & Peter P. Wakker, 2016. "Ambiguity Attitudes in a Large Representative Sample," Management Science, INFORMS, vol. 62(5), pages 1363-1380, May.
    5. Dimmock, Stephen G. & Kouwenberg, Roy & Mitchell, Olivia S. & Peijnenburg, Kim, 2016. "Ambiguity aversion and household portfolio choice puzzles: Empirical evidence," Journal of Financial Economics, Elsevier, vol. 119(3), pages 559-577.
    6. Gianna Lotito & Anna Maffioletti & Michele Santoni, 2024. "Testing source influence on ambiguity reaction: Preference and insensitivity," Journal of Risk and Uncertainty, Springer, vol. 69(3), pages 349-411, December.
    7. Li, Wenhui & Ockenfels, Peter & Wilde, Christian, 2021. "The effect of ambiguity on price formation and trading behavior in financial markets," SAFE Working Paper Series 326, Leibniz Institute for Financial Research SAFE.
    8. Wu, Keyu & Fehr, Ernst & Hofland, Sean & Schonger, Martin, 2024. "On the Psychological Foundations of Ambiguity and Compound Risk Aversion," IZA Discussion Papers 17032, IZA Network @ LISER.
    9. Mohammed Abdellaoui & Horst Zank, 2023. "Source and rank-dependent utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 949-981, May.
    10. Aurélien Baillon & Zhenxing Huang & Asli Selim & Peter P. Wakker, 2018. "Measuring Ambiguity Attitudes for All (Natural) Events," Econometrica, Econometric Society, vol. 86(5), pages 1839-1858, September.
    11. Izhakian, Yehuda, 2020. "A theoretical foundation of ambiguity measurement," Journal of Economic Theory, Elsevier, vol. 187(C).
    12. Kanin Anantanasuwong & Roy Kouwenberg & Olivia S. Mitchell & Kim Peijnenberg, 2019. "Ambiguity Attitudes about Investments: Evidence from the Field," NBER Working Papers 25561, National Bureau of Economic Research, Inc.
    13. Daniel R. Burghart & Thomas Epper & Ernst Fehr, 2020. "The uncertainty triangle – Uncovering heterogeneity in attitudes towards uncertainty," Journal of Risk and Uncertainty, Springer, vol. 60(2), pages 125-156, April.
    14. König-Kersting, Christian & Kops, Christopher & Trautmann, Stefan T., 2023. "A test of (weak) certainty independence," Journal of Economic Theory, Elsevier, vol. 209(C).
    15. Baillon, Aurélien & Placido, Lætitia, 2019. "Testing constant absolute and relative ambiguity aversion," Journal of Economic Theory, Elsevier, vol. 181(C), pages 309-332.
    16. Kanin Anantanasuwong & Roy Kouwenberg & Olivia S. Mitchell & Kim Peijnenburg, 2024. "Ambiguity attitudes for real-world sources: field evidence from a large sample of investors," Experimental Economics, Springer;Economic Science Association, vol. 27(3), pages 548-581, July.
    17. Robin Cubitt & Gijs Kuilen & Sujoy Mukerji, 2018. "The strength of sensitivity to ambiguity," Theory and Decision, Springer, vol. 85(3), pages 275-302, October.
    18. Chen Li, 2017. "Are the poor worse at dealing with ambiguity?," Journal of Risk and Uncertainty, Springer, vol. 54(3), pages 239-268, June.
    19. Phoebe Koundouri & Nikitas Pittis & Panagiotis Samartzis & Konstantinos Georgalos, 2025. "Comparative Ignorance as an Explanation of Ambiguity Aversion and Ellsberg Choices: A Survey with a New Proposal for Bayesian Training," DEOS Working Papers 2572, Athens University of Economics and Business.
    20. Yoram Halevy & David Walker-Jones & Lanny Zrill, 2023. "Difficult Decisions," Working Papers tecipa-753, University of Toronto, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:46:y:2025:i:8:p:4335-4346. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.