Loss aversion and learning to bid
Bidding challenges learning theories. Even with the same bid, experiences vary stochastically: the same choice can result in either a gain or a loss. In such an environment, the question arises of how the nearly universally documented phenomenon of loss aversion affects the adaptive dynamics. We analyse the impact of loss aversion in a simple auction using the experienced-weighted attraction model of learning. Our experimental results suggest that individual learning dynamics are highly heterogeneous and affected by loss aversion to different degrees. Apart from that, the experiment shows that loss aversion is not specific to rare decision-making.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2012|
|Date of revision:|
|Publication status:||Published in Economica 314 79(2012): pp. 226-257|
|Contact details of provider:|| Postal: |
Web page: http://www.vwl.uni-muenchen.de
More information through EDIRC
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.:
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Selten, Reinhard & Joachim Buchta, 1994. "Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions," Discussion Paper Serie B 270, University of Bonn, Germany.
- Olivier Armantier, 2001.
"Does Observation Influence Learning?,"
Department of Economics Working Papers
01-04, Stony Brook University, Department of Economics.
- Garvin, Susan & Kagel, John H., 1994. "Learning in common value auctions: Some initial observations," Journal of Economic Behavior & Organization, Elsevier, vol. 25(3), pages 351-372, December.
- Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
- Anderhub, Vital & Engelmann, Dirk & Guth, Werner, 2002.
"An experimental study of the repeated trust game with incomplete information,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 48(2), pages 197-216, June.
- Anderhub, Vital & Güth, Werner & Engelmann, Dirk, 1999. "An experimental study of the repeated trust game with incomplete information," SFB 373 Discussion Papers 1999,97, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Bodo Vogt & Wulf Albers, 1997. "The Selection of Mixed Strategies in 2x2 Bimatrix Games," Working Papers 268, Bielefeld University, Center for Mathematical Economics.
- Ball, Sheryl B. & Bazerman, Max H. & Carroll, John S., 1991. "An evaluation of learning in the bilateral winner's curse," Organizational Behavior and Human Decision Processes, Elsevier, vol. 48(1), pages 1-22, February.
- Werner G¸th & Radosveta Ivanova-Stenzel & Manfred K–nigstein & Martin Strobel, 2003.
"Learning to bid - an experimental study of bid function adjustments in auctions and fair division games,"
Royal Economic Society, vol. 113(487), pages 477-494, 04.
- Güth, Werner & Ivanova, Radosveta & Königstein, Manfred & Strobel, Martin, 1999. "Learning to bid: An experimental study of bid function adjustments in auctions and fair division games," SFB 373 Discussion Papers 1999,70, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Gneezy, Uri & Potters, Jan, 1997.
"An Experiment on Risk Taking and Evaluation Periods,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(2), pages 631-45, May.
- Gneezy, U. & Potters, J.J.M., 1997. "An experiment on risk taking and evaluation periods," Other publications TiSEM da6ba1bf-e15c-41b2-ae95-c, Tilburg University, School of Economics and Management.
- Gneezy, U. & Potters, J.J.M., 1996. "An experiment on risk taking and evaluation periods," Discussion Paper 1996-61, Tilburg University, Center for Economic Research.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
- Shlomo Benartzi & Richard H. Thaler, 1993.
"Myopic Loss Aversion and the Equity Premium Puzzle,"
NBER Working Papers
4369, National Bureau of Economic Research, Inc.
- Benartzi, Shlomo & Thaler, Richard H, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 73-92, February.
- 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.
- Erev, Ido & Roth, Alvin E, 1998. "Predicting How People Play Games: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria," American Economic Review, American Economic Association, vol. 88(4), pages 848-81, September.
- Avrahami, Judith & Güth, Werner & Kareev, Yaakov, 2001. "Predating predators: An experimental study," SFB 373 Discussion Papers 2001,35, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Teck H Ho & Colin Camerer & Juin-Kuan Chong, 2003. "Functional EWA: A one-parameter theory of learning in games," Levine's Working Paper Archive 506439000000000514, David K. Levine.
When requesting a correction, please mention this item's handle: RePEc:lmu:muenar:18205. 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: (Alexandra Frank)
If references are entirely missing, you can add them using this form.