The effect of payoff feedback and information pooling on reasoning errors: Evidence from experimental markets

The effect of payoff feedback and information pooling on reasoning errors: Evidence from experimental markets

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Article ID: iaor2008550
Country: United States
Volume: 51
Issue: 12
Start Page Number: 1829
End Page Number: 1843
Publication Date: Dec 2005
Journal: Management Science
Authors: ,
Keywords: bidding
Abstract:

A vast literature shows that individuals frequently violate normative principles in reasoning. In this paper, we report the results of four studies designed to determine if information dissemination in competitive auctions can reduce, or even eliminate, logical errors in the Wason selection task. Our results show that payoff feedback and exposure to the information flow drive the aggregate behavior toward the normative solution. We also found evidence of spillover effects from informed to uninformed traders in one-sided combinatorial auctions, as well as positive transfer effects from competitive to individual settings.

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