Quantum Model of Decision-Making in Economics

Herzog, Bodo

doi:10.4236/jqis.2015.51001

Cited by 5 publications

(4 citation statements)

References 18 publications

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“…In the second subsection, I study the econometric findings in regard to the idiosyncratic and socio-economic variables in relation to the revealed 'real' and 'experimental' (inflation) expectations. The final subsection is devoted to an empirical test of the quarter law assumed in a quantum model of decision-making (Herzog, 2015). round, the value is close to 3.0, followed by a continuous decline to 1.4 in round III.…”

Section: Resultsmentioning

confidence: 99%

“…This is partly surprising based on the standard utility theory because the majority of people who choose a number at the credible target will definitely lose the game and thereby achieve lower economic utility. However the new idea of a quantum model of decision-making provides a reasonable explanation to this behavior: people are more attracted to the credible target, and thus the so-called attraction factor outweighs the utility factor (Herzog, 2015). People choose the target level despite losing utility in the game; overall they are better off.…”

Section: Results Of the Game Experimentsmentioning

confidence: 99%

“…The final subsection is devoted to the verification of the so-called quarter-law in a quantum model of decisionmaking (QMDM) (von Neumann & Morgenstern, 1953;Yukalov & Sornette, 2011;Herzog, 2015). The QMDM is a new alternative to existing behavioral economic models due to several decision-making paradoxes (Ellsberg, 1961;Kahneman & Tversky, 1976;Loomes & Sugden, 1982;Chew et al 1991;Ariely, 2008).…”

Section: Further Empirical Resultsmentioning

confidence: 99%

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Anchoring of Expectations: The Role of Credible Targets in a Game Experiment

Herzog

2015

JEFS

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This paper provides new evidence on the formation and anchoring of inflation expectations. I conduct a game experiment and analyze the adjustment as well as the impact of credible targets on expectations. In addition, I evaluate the idiosyncratic determinants on the formation of expectations. The analysis reveals six results: First, I find evidence that long-term inflation expectations are firmly anchored to a credible target. Second, a temporary deviation due to unexpected monetary policy might trigger a decline in credibility, and third a de-anchoring of expectations due to uncertainty. Fourth, I find that people change their expectations little if a credible target exists. Fifth, expectations exhibit a large degree of time-variance only in environments without a target. Sixth, the dynamic adjustment to an 'incomplete' equilibrium, which is theoretically unstable, is nevertheless rapid and persistent in case of credible targets. All in all, I demonstrate a unique game setup with contributions to both experimental and monetary economics.

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Section: Resultsmentioning

confidence: 99%

Section: Results Of the Game Experimentsmentioning

confidence: 99%

Section: Further Empirical Resultsmentioning

confidence: 99%

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Anchoring of Expectations: The Role of Credible Targets in a Game Experiment

Herzog

2015

JEFS

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“…Furthermore, [22] argues that the Nash equilibrium is achieved over time. Models by MacLeod or Herzog [23,24] examine how individuals learn.…”

Section: Literaturementioning

confidence: 99%

Exploring a Dualism of Human Rationality: Experimental Study of a Cheating Contest Game

Herzog

Schnee

2022

IJERPH

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Rational behavior is a standard assumption in science. Indeed, rationality is required for environmental action towards net-zero emissions or public health interventions during the SARS-CoV-2 pandemic. Yet, little is known about the elements of rationality. This paper explores a dualism of rationality comprised of optimality and consistency. By designing a new guessing game, we experimentally uncover and disentangle two building blocks of human rationality: the notions of optimality and consistency. We find evidence that rationality is largely associated to optimality and weakly to consistency. Remarkably, under uncertainty, rationality gradually shifts to a heuristic notion. Our findings provide insights to better understand human decision making.

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An Enjoyable Research Journey on Uncertainty

Nguyen

2020

Statistical and Fuzzy Approaches to Data Processing, With Applications to Econometrics and Other Areas

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Quantum Model of Decision-Making in Economics

Cited by 5 publications

References 18 publications

Anchoring of Expectations: The Role of Credible Targets in a Game Experiment

Anchoring of Expectations: The Role of Credible Targets in a Game Experiment

Exploring a Dualism of Human Rationality: Experimental Study of a Cheating Contest Game

An Enjoyable Research Journey on Uncertainty

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