Shunning uncertainty: The neglect of learning opportunities

Stefan Trautmann and Richard Zeckhauser

Games and Economic Behavior, 2013, vol. 79, issue C, 44-55

Abstract: Financial, managerial, and medical decisions often involve alternatives whose possible outcomes have uncertain probabilities. In contrast to alternatives whose probabilities are known, these uncertain alternatives offer the benefits of learning. In repeat-choice situations, such learning brings value. If probabilities appear favorable (unfavorable), a choice can be repeated (avoided). In a series of experiments involving bets on the colors of poker chips drawn from bags, decision makers often prove to be blind to the learning opportunities offered by uncertain probabilities. They forgo significant expected payoffs when they shun uncertain alternatives in favor of known ones. Worse, when information is revealed, many make choices contrary to learning. Priming with optimal strategies offers little improvement. Such decision makers violate identified requirements for making rational decisions.

Keywords: Risk; Uncertainty; Learning; Information; Gamblerʼs fallacy (search for similar items in EconPapers)
JEL-codes: C91 D81 D83 G11 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Shunning Uncertainty: The Neglect of Learning Opportunities (2011)
Working Paper: Shunning Uncertainty: The Neglect of Learning Opportunities (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:79:y:2013:i:c:p:44-55

DOI: 10.1016/j.geb.2013.01.001

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