The Thrill of Gradual Learning

Faruk Gul, Paulo Natenzon, Erkut Ozbay and Wolfgang Pesendorfer
Additional contact information
Faruk Gul: Princeton University
Paulo Natenzon: Washington University in St. Louis
Wolfgang Pesendorfer: Princeton University

Working Papers from Princeton University. Economics Department.

Abstract: We report on an experiment that shows subjects prefer a gradual resolution of uncertainty when information about winning yields decisive bad news but inconclusive good news. This behavior is difficult to reconcile with existing theories of choice under uncertainty, including the Kreps-Porteus model. We show how the behavioral patterns uncovered by our experiment can be understood as arising from subjects’ special emphasis on their best (peak) and worst (trough) experiences along the realized path of uncertainty.

Keywords: uncertainty (search for similar items in EconPapers)
JEL-codes: D80 D81 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-ban, nep-cbe and nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2020-8

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