Lunchtime Economics Seminar Series. High Stakes Failures of Backward Induction
Published: 29 September 2023
4 October. Dr Dennie van Dolder, University of Essex
Dr Dennie van Dolder, University of Essex
"High Stakes Failures of Backward Induction"
Wednesday, 4 October. 13:00
Room 355 Gilbert Scott Building
Abstract
We examine high-stakes strategic choice using more than 40 years of data from the American TV game show The Price Is Right. In every episode, contestants play the Showcase Showdown, a sequential game of perfect information for which the optimal strategy can be found through backward induction. We find that contestants systematically deviate from the subgame perfect Nash equilibrium. These departures from optimality are well explained by a modified agent quantal response model that allows for limited foresight. The results suggest that many contestants simplify the decision problem by adopting a myopic representation and optimize their chances of beating the next contestant only. In line with learning, the quality of contestants' choices improves over the course of our sample period.
Bio
Dennie van Dolder is Senior Lecturer (equivalent to tenured Associate Professor) at the University of Essex, where he serves as the director of the Essex Centre for Experimental Social Sciences (ExCESS) and the Essex Behavioural Science Lab (ESSEXLab). He is a behavioural economist and uses a broad portfolio of research methods – including experiments and advanced microeconometric techniques – to further our understanding of human judgment and decision making. Whereas most empirical research in this area relies on laboratory experiments, van Dolder often employs large and rich data sets from carefully selected field settings to test behavioural hypotheses. In addition, he works on the development of choice-based methods to quantitatively measure people’s preferences and beliefs. He, for example, developed a method to measure loss aversion that is used by banks in their risk-profiling applications. Prior to joining Essex, van Dolder held academic appointments at the Vrije Universiteit (VU) Amsterdam and the University of Nottingham.
For further information, please contact business-school-research@glasgow.ac.uk
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First published: 29 September 2023
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