Learning Direction Theory and the Winner ’ s Curse

@inproceedings{Selten2001LearningDT,
  title={Learning Direction Theory and the Winner ’ s Curse},
  author={Reinhard Selten and Klaus Abbink and Ricarda Cox},
  year={2001}
}
We report an experiment on a decision task by SAMUELSON and BAZERMAN (1985). Subjects submit a bid for an item with an unknown value. A winner’s curse phenomenon arises when subjects bid too high and make losses. Learning direction theory can account for this. However, other influences on behaviour can also be identified. We introduce impulse balance theory to make quantitative predictions on the basis of learning direction theory. We also look at monotonic ladder processes. It is shown that… CONTINUE READING
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