Knowing When to Stop and Make a Choice, an Experiment on Optimal Sequential Sampling

Descamps, Ambroise; Massoni, Sébastien; Page, Lionel

doi:10.2139/ssrn.2883847

Cited by 3 publications

(1 citation statement)

References 35 publications

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“…On the contrary,Kuhnen (2015) found that investors tend to react more to information infer from losses than gains 11. Examples of confirmation bias include:Wason (1968);Rabin and Schrag (1999);Jones and Sugden (2001);Descamps et al (2016);Charness and Dave (2017).…”

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Overconfidence as an interpersonal strategy

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Standard economic models assume that individuals collect and process information in a way that gives them a relatively accurate perception of reality. However, this assumption is often violated. Data shows that individuals often form positively biased beliefs about themselves, which can have detrimental economic consequences. This thesis aims to explain the persistence of overconfidence in social interactions by showing the existence of strategic benefits of being overconfident that offset its social cost.Using a series of laboratory experiments, this thesis shows that (i) overconfidence emerges primarily when it provides an advantage in social interactions (Chapter 2) and (ii) identify situations in which overconfidence is likely to be socially detrimental (Chapter 3 and 4). This thesis contributes to the literature by enhancing our understanding of the situational determinants of overconfidence in social interactions and lay the foundations to improve policies intended to prevent or limit its negative effects.

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Overconfidence as an interpersonal strategy

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Too Proud to Stop: Regret in Dynamic Decisions

Strack

Viefers

2019

Journal of the European Economic Association

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Regret and its anticipation affect a wide range of decisions. Job-seekers reject offers while waiting for an offer to match their best past offer; investors hold on to badly performing stocks; and managers throw good money after bad projects. We analyze behavior of a decision maker with regret preferences in a dynamic context and show that regret agents have a disposition to gamble until they receive a payoff matching the best past offer. Results from a lab experiment confirm that many subjects exhibit such behavior and are reluctant to stop below the past peak.

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Too Proud to Stop: Regret in Dynamic Decisions

Viefers

Strack²

2014

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. optimal choice in an optimal stopping task. We derive the optimal strategy under such regret preferences, and show how it is different from that of an expected utility maximizer. We also show that if the decision maker never commits mistakes the behavior resulting from this strategy is observationally equivalent to that of an expected utility maximizer. Terms of use: Documents inWe then test our theoretical predictions in the laboratory. The results from a structural discrete choice model we fit to our data provide strong evidence that many people's stopping behavior is largely determined by the anticipation of and aversion to regret.JEL-Classification: D03, C91

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Knowing When to Stop and Make a Choice, an Experiment on Optimal Sequential Sampling

Cited by 3 publications

References 35 publications

Overconfidence as an interpersonal strategy

Overconfidence as an interpersonal strategy

Too Proud to Stop: Regret in Dynamic Decisions

Too Proud to Stop: Regret in Dynamic Decisions

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