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- Title
Loss Aversion and Learning to Bid.
- Authors
Dittrich, Dennis A. V.; Güth, Werner; Kocher, Martin G.; Pezanis-Christou, Paul
- 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.
- Subjects
BIDDING strategies; LOSS aversion; DECISION making; LEARNING; AUCTIONS
- Publication
Economica, 2012, Vol 79, Issue 314, p226
- ISSN
0013-0427
- Publication type
Article
- DOI
10.1111/j.1468-0335.2011.00892.x