Shunning Uncertainty: The Neglect of Learning Opportunities

Stefan Trautmann and Richard Zeckhauser

Working Paper Series from Harvard University, John F. Kennedy School of Government

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. Such decision makers violate rational decision making and forgo significant expected payoffs when they shun uncertain alternatives in favor of risky ones. Worse, when information is revealed, many make choices contrary to learning. A range of factors explain these violations. The results indicate that priming with optimal strategies offers little improvement.

JEL-codes: C91 D81 D83 G11 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-cbe, nep-evo and nep-exp
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https://research.hks.harvard.edu/publications/work ... ?PubId=8054&type=WPN

Related works:
Journal Article: Shunning uncertainty: The neglect of learning opportunities (2013)
Working Paper: Shunning Uncertainty: The Neglect of Learning Opportunities (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp11-044

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