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We characterize revenue maximizing mechanisms in a common value environment where the value of the object is equal to the highest of bidders' independent signals. The optimal mechanism exhibits either neutral selection, wherein the object is randomly allocated at a price that all bidders are...
Persistent link: https://www.econbiz.de/10011948704
A single unit of a good is to be sold by auction to one of two buyers. The good has either a high value or a low value, with known prior probabilities. The designer of the auction knows the prior over values but is uncertain about the correct model of the buyers' beliefs. The designer evaluates...
Persistent link: https://www.econbiz.de/10012977350
We study auction design when bidders have a pure common value equal to the maximum of their independent signals. In the revenue maximizing mechanism, each bidder makes a payment that is independent of his signal and the allocation discriminates in favor of bidders with lower signals. We provide...
Persistent link: https://www.econbiz.de/10012977351
effects of risk aversion on observed behavior in economic in settings, e.g. bargaining, auctions, and contests. Some …
Persistent link: https://www.econbiz.de/10014025528
This paper discusses two approaches for the analysis of multi-outcome lotteries. The first uses Cumulative Prospect Theory. The second is the Relative Utility Function, which strongly resembles the utility function hypothesized by Markowitz (1952). It is shown that the relative utility model...
Persistent link: https://www.econbiz.de/10013142875
We report an experiment in which subjects are not indifferent between real-money lotteries implemented with …
Persistent link: https://www.econbiz.de/10013068226
This study compares the performance of Prospect Theory versus Stochastic Expected Utility Theory at fitting data on decision making under risk. Both theories incorporate well-known deviations from Expected Utility Maximization such as the Allais paradox or the fourfold pattern of risk attitudes....
Persistent link: https://www.econbiz.de/10003894019
Although risk aversion has been used in economic models for over 275 years, the past few decades have shown how higher order risk attitudes are also quite important. A behavioral approach to defining such risk attitudes was developed by Eeckhoudt and Schlesinger (2006), based upon simple lottery...
Persistent link: https://www.econbiz.de/10010431278
This paper investigates the behavior of contestants in the game show "Quiz Taxi" when faced with the decision whether to bet the winnings they have acquired on a final "double or nothing" question. The decision is made by groups of two or three persons. This set-up enables the decision making...
Persistent link: https://www.econbiz.de/10009580287
Quantum decision theory (QDT) is a recently developed theory of decision making based on the mathematics of Hilbert spaces, a framework known in physics for its application to quantum mechanics. This framework formalizes the concept of uncertainty and other effects that are particularly manifest...
Persistent link: https://www.econbiz.de/10011514496