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

See all articles by Tilman Slembeck

Tilman Slembeck

University of St. Gallen - SEPS: Economics and Political Sciences

Jean-Robert Tyran

University of Vienna; University of Copenhagen - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

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

Slembeck, Tilman and Tyran, Jean-Robert, Do Institutions Promote Rationality? An Experimental Study of the Three-Door Anomaly (September 1, 2002). U of St. Gallen Economics Working Paper No. 2002-21, Journal of Economic Behavior and Organization, Vol. 54, No. 3, 2004, Available at SSRN: https://ssrn.com/abstract=345721 or http://dx.doi.org/10.2139/ssrn.345721

Tilman Slembeck

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

Rosenbergstrasse 51
St. Gallen, St. Gallen CH-9000
Switzerland
+41 71 224 25 49 (Phone)
+41 71 224 25 38 (Fax)

HOME PAGE: www.slembeck.ch/slem-eng.html

Jean-Robert Tyran (Contact Author)

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/jean-robert.tyran/

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+45 353 23 027 (Phone)

HOME PAGE: http://www.econ.ku.dk/tyran/

Centre for Economic Policy Research (CEPR)

London
United Kingdom