Do Institutions Promote Rationality? An Experimental Study of the Three-Door Anomaly
U of St. Gallen Economics Working Paper No. 2002-21
Journal of Economic Behavior and Organization, Vol. 54, No. 3, 2004
36 Pages Posted: 22 Nov 2002 Last revised: 17 Oct 2008
There are 2 versions of this paper
Do Institutions Promote Rationality? An Experimental Study of the Three-Door Anomaly
Date Written: September 1, 2002
Abstract
The three-door problem is an astounding example of a systematic violation of a key rationality postulate. In this seemingly simple individual decision task, most people initially fail to correctly apply Bayes' Law, and to make the payoff-maximizing choice. Previous experimental studies have shown that individual learning reduces the incidence of irrational choices somewhat, but is far from eliminating it. We experimentally study the roles of communication and competition as institutions to mitigate the choice anomaly. We show that the three-door anomaly can be entirely eliminated by these institutions.
Keywords: Bayes' Law, learning, competition, communication, individual decision making, group decision making
JEL Classification: C72, C92
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Effect of Intergroup Competition on Group Coordination: An Experimental Study
By Gary Bornstein, Uri Gneezy, ...
-
Do Actions Speak Louder than Words? An Experimental Comparison of Observation and Cheap Talk
By John Duffy and Nick Feltovich