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When can it make sense to throw away payoffs?

Author

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  • Felix Höffler

    ()

Abstract

We investigate when destroying payoff can be beneficial in a learning process of a boundedly rational, risk averse agent. Destroying payoff reduces average returns but can - as a "self punishment" - accelerarte learning. This smoothens payoffs and can thereby increase expected utility.

Suggested Citation

  • Felix Höffler, 2009. "When can it make sense to throw away payoffs?," WHU Working Paper Series - Economics Group 09-01, WHU - Otto Beisheim School of Management.
  • Handle: RePEc:whu:wpaper:09-01
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    File URL: https://nbn-resolving.org/urn:nbn:de:hbz:992-opus4-5184
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    More about this item

    Keywords

    Bounded rationality; Learning; Sunk costs;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • 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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