TY - JOUR
T1 - Shunning uncertainty
T2 - The neglect of learning opportunities
AU - Trautmann, S.T.
AU - Zeckhauser, R.J.
PY - 2013
Y1 - 2013
N2 - 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.
AB - 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.
U2 - 10.1016/j.geb.2013.01.001
DO - 10.1016/j.geb.2013.01.001
M3 - Article
SN - 0899-8256
VL - 79
SP - 44
EP - 55
JO - Games and Economic Behavior
JF - Games and Economic Behavior
ER -