Learning to hesitate
Ambroise Descamps (),
Sebastien Massoni () and
Lionel Page ()
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Ambroise Descamps: School of Economics and Finance, Queensland University of Technology; Oxera Consulting LLP
Sebastien Massoni: School of Economics and Finance, Queensland University of Technology
No 2019/04, Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney
We investigate how people make choices when they are unsure about the value of the options they face and have to decide whether to choose now or wait and acquire more information first. We design a laboratory experiment to study whether human behaviour is able to approximate the optimal solution to this problem. We find that participants deviate from it in a systematic manner: they acquire too much information (when costly) or not enough (when cheap). These deviations costs participants between 10% and 25% of their potential payoffs. With time, participants tend to learn to approximate the optimal strategy.
Keywords: search; decision under uncertainty; information; optimal stopping; real option (search for similar items in EconPapers)
JEL-codes: C91 D81 D83 (search for similar items in EconPapers)
Pages: 51 pages
New Economics Papers: this item is included in nep-cbe and nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:uts:ecowps:2019/04
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