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Optimistic Behavior When A Decision Bias Is Costly: An Experimental Test

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  • ASTRI MUREN

Abstract

The existence of optimism when biased decisions are costly is investigated experimentally. Subjects make an informed guess about an exogenously determined event: the outside temperature a couple of days later. Payments in the control group depend only on how close the guess was to the realized temperature, while payments in the treatment group also depend positively on realized temperature. The data show the treatment group subjects to guess higher temperatures, that is, higher payments, compared with the control group. Results thus indicate that there is optimism also when a decision bias is costly. (JEL C91, D81, D84)

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  • Astri Muren, 2012. "Optimistic Behavior When A Decision Bias Is Costly: An Experimental Test," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 463-469, April.
    • Handle: RePEc:bla:ecinqu:v:50:y:2012:i:2:p:463-469
    DOI: j.1465-7295.2010.00359.x
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    References listed on IDEAS

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    Cited by:

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    2. Miettinen, Topi & Kosfeld, Michael & Fehr, Ernst & Weibull, Jörgen, 2020. "Revealed preferences in a sequential prisoners’ dilemma: A horse-race between six utility functions," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 1-25.
    3. J. Edward Russo & Jonathan C. Corbin, 2016. "Not by desire alone: The role of cognitive consistency in the desirability bias," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 11(5), pages 449-459, September.
    4. repec:cup:judgdm:v:11:y:2016:i:5:p:449-459 is not listed on IDEAS

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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