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Learning to hesitate

Author

Listed:
  • Ambroise Descamps

    (School of Economics and Finance, Queensland University of Technology; Oxera Consulting LLP)

  • Sebastien Massoni

    (School of Economics and Finance, Queensland University of Technology)

  • Lionel Page

    (University of Technology Sydney)

Abstract

We investigate how people make choices when they are unsure about the value of the options they face and have to decide whether to choose now or wait and acquire more information first. We design a laboratory experiment to study whether human behaviour is able to approximate the optimal solution to this problem. We find that participants deviate from it in a systematic manner: they acquire too much information (when costly) or not enough (when cheap). These deviations costs participants between 10% and 25% of their potential payoffs. With time, participants tend to learn to approximate the optimal strategy.

Suggested Citation

  • Ambroise Descamps & Sebastien Massoni & Lionel Page, 2019. "Learning to hesitate," Working Paper Series 2019/04, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
  • Handle: RePEc:uts:ecowps:2019/04
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    References listed on IDEAS

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    More about this item

    Keywords

    search; decision under uncertainty; information; optimal stopping; real option;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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