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The Satisficer’s Curse

Author

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  • Robert E. Marks

    (School of Economics, Australian School of Business, the University of New South Wales)

Abstract

Following the Winner’s Curse and the Optimizer’s Curse, this paper introduces the Satisficer’s Curse. The Winner’s Curse requires competition between agents in an auction for, usually, a common-value item; the Optimizer’s Curse is a systematic overvaluation when the decision maker is choosing the highest-valued prospect of a set of uncertain future outcomes. The Satisficer’s Curse is a systematic overvaluation that occurs when any uncertain prospect is chosen because its estimate exceeds a positive threshold. It is the most general version of the three curses, all of which can be seen as statistical artefacts.

Suggested Citation

  • Robert E. Marks, 2013. "The Satisficer’s Curse," Discussion Papers 2013-28, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2013-28
    as

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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2013-28.pdf
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    References listed on IDEAS

    as
    1. Edward P. Lazear, 2004. "The Peter Principle: A Theory of Decline," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 141-163, February.
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    4. Brown, Keith C, 1974. "A Note on the Apparent Bias of Net Revenue Estimates for Capital Investment Projects," Journal of Finance, American Finance Association, vol. 29(4), pages 1215-1216, September.
    5. James E. Smith & Robert L. Winkler, 2006. "The Optimizer's Curse: Skepticism and Postdecision Surprise in Decision Analysis," Management Science, INFORMS, vol. 52(3), pages 311-322, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    decision analysis; investment; probability; ex-post disappointment; winner's curse;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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