Loss aversion and learning to bid

Dennis Dittrich, Werner Güth (), Martin Kocher and Paul Pezanis-Christou

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: Bidding challenges learning theories. Even with the same bid, experiences vary stochastically: the same choice can result in either a gain or a loss. In such an environment, the question arises of how the nearly universally documented phenomenon of loss aversion affects the adaptive dynamics. We analyse the impact of loss aversion in a simple auction using the experienced-weighted attraction model of learning. Our experimental results suggest that individual learning dynamics are highly heterogeneous and affected by loss aversion to different degrees. Apart from that, the experiment shows that loss aversion is not specific to rare decision-making.

Date: 2012
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Citations: View citations in EconPapers (16)

Published in Economica 314 79(2012): pp. 226-257

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Journal Article: Loss Aversion and Learning to Bid (2012)
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