Individual and Group Decision Making Under Risk: An Experimental Study of Bayesian Updating and Violations of First-order Stochastic Dominance
This paper reports the results of experiments designed to test whether individuals and groups abide by monotonicity with respect to first-order stochastic dominance and Bayesian updating, when making decisions under risk. The results indicate a significant number of violations of both principles. The violation rate when groups make decisions is substantially lower, and decreasing with group size, suggesting that social interaction improves the decision-making process. Greater transparency of the decvision task reduce the violation rate, suggesting that these violations are due to judgment errors rather than the preference structure. In one treatment, however, less complex decisions result in higher error rate.
|Date of creation:||01 Oct 2007|
|Date of revision:|
|Contact details of provider:|| Postal: 2127 North Hall, Santa Barbara, CA 93106-9210|
Phone: (805) 893-3670
Fax: (805) 893-8830
Web page: http://www.escholarship.org/repec/ucsbecon_dwp/
More information through EDIRC
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.:
- Martin G. Kocher & Matthias Sutter, 2005.
"The Decision Maker Matters: Individual Versus Group Behaviour in Experimental Beauty-Contest Games,"
Royal Economic Society, vol. 115(500), pages 200-223, 01.
- Kocher, Martin G. & Sutter, Matthias, 2005. "The decision maker matters: Individual versus group behaviour in experimental beauty-contest games," Munich Reprints in Economics 18213, University of Munich, Department of Economics.
- Martin G. Kocher & Matthias Sutter, 2004. "The Decision Maker Matters: Individual versus Group Behaviour in Experimental Beauty-Contest Games," Papers on Strategic Interaction 2004-09, Max Planck Institute of Economics, Strategic Interaction Group.
- Grether, David M., 1992.
"Testing bayes rule and the representativeness heuristic: Some experimental evidence,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 17(1), pages 31-57, January.
- Grether, David M., 1990. "Testing Bayes Rule and the Representativeness Heuristic: Some Experimental Evidence," Working Papers 724, California Institute of Technology, Division of the Humanities and Social Sciences.
- David M. Grether, 1980. "Bayes Rule as a Descriptive Model: The Representativeness Heuristic," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 537-557.
- David J. Cooper & John H. Kagel, 2005. "Are Two Heads Better Than One? Team versus Individual Play in Signaling Games," American Economic Review, American Economic Association, vol. 95(3), pages 477-509, June.
- Ganguly, Ananda R & Kagel, John H & Moser, Donald V, 2000.
"Do Asset Market Prices Reflect Traders' Judgment Biases?,"
Journal of Risk and Uncertainty,
Springer, vol. 20(3), pages 219-45, May.
- Ananda Ganguly & John Kagel & Donald Moser, 2000. "Do Asset Market Prices Reflect Traders' Judgment Biases?," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 219-245, May.
- Ouwersloot, Hans & Nijkamp, Peter & Rietveld, Piet, 1998. "Errors in probability updating behaviour : Measurement and impact analysis," Journal of Economic Psychology, Elsevier, vol. 19(5), pages 535-563, October.
- 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.
- Zizzo, Daniel John & Stolarz-Fantino, Stephanie & Wen, Julie & Fantino, Edmund, 2000. "A violation of the monotonicity axiom: experimental evidence on the conjunction fallacy," Journal of Economic Behavior & Organization, Elsevier, vol. 41(3), pages 263-276, March.
When requesting a correction, please mention this item's handle: RePEc:cdl:ucsbec:qt4gr7j8z8. 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: (Lisa Schiff)
If references are entirely missing, you can add them using this form.