Learning Direction Theory and the Winner s Curse

Reinhard Selten, Klaus Abbink and Ricarda Cox

No 10/2001, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: We report an experiment on a decision task by SAMUELSON and BAZERMAN (1985). Subjects submit a bid for an item with an unknown value. A winner’s curse phenomenon arises when subjects bid too high and make losses. Learning direction theory can account for this. However, other influences on behaviour can also be identified. We introduce impulse balance theory to make quantitative predictions on the basis of learning direction theory. We also look at monotonic ladder processes. It is shown that for this kind of Markov chains the impulse balance point is connected to the mode of the stationary distribution.

Keywords: Experimental economics; learning; individual decision making (search for similar items in EconPapers)
JEL-codes: C91 D81 D83 (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/78393/1/bgse10_2001.pdf (application/pdf)

Related works:
Journal Article: Learning Direction Theory and the Winner’s Curse (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:102001

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).