Do Institutions Promote Rationality? An Experimental Study of the Three-Door Anomaly

Tilman Slembeck () and Jean-Robert Tyran ()

University of St. Gallen Department of Economics working paper series 2002 from Department of Economics, University of St. Gallen

Abstract: The three-door problem is an astounding example of a systematic violation of a key rationality postulate. In this seemingly simple individual decision task, most people initially fail to correctly apply Bayes’ Law, and to make the payoff-maximizing choice. Previous experimental studies have shown that individual learning reduces the incidence of irrational choices somewhat, but is far from eliminating it. We experimentally study the roles of communication and competition as institutions to mitigate the choice anomaly. We show that the three-door anomaly can be entirely eliminated by these institutions.

Keywords: Bayes’ Law; learning; competition; communication; individual decision making; group decision making. (search for similar items in EconPapers)
JEL-codes: C72 C92 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-cdm and nep-exp
Date: 2002-10
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Journal Article: Do institutions promote rationality?: An experimental study of the three-door anomaly (2004)
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