| Abstract: | Human subjects decide when to sink a fixed cost C to seize an irreversible investment opportunity whose value V is governed by Brownian motion. The optimal policy is to invest when V first crosses a threshold V* = (1 + w*) C, where the wait option premium w* depends on drift, volatility, and expiration hazard parameters. Subjects in the Low w* treatment on average invest at values quite close to optimum. Subjects in the two Medium and the High w* treatments invested at values below optimum, but with the predicted ordering, and values approached the optimum by the last block of 20 periods. ?? 2009 The Review of Economic Studies Limited. |
| Genre: | Article |
| ProdID: | 70034884 |
| Citation Author: | Oprea, R.; Friedman, D.; Anderson, S. T. |
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| Citation End Page: | 1124 |
| Citation Issue: | 3 |
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| Citation Language: | English |
| Citation Larger Work Title: | Review of Economic Studies |
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| Citation Number Of Pages: | 22 |
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| Citation Search Results Text: | Learning to wait: A laboratory investigation; 2009; Article; Journal; Review of Economic Studies; Oprea, R.; Friedman, D.; Anderson, S. T. |
| Citation Start Page: | 1103 |
| Citation Volume: | 76 |
| Citation Year: | 2009 |
| Type: | citation/reference |
| Text: | Learning to wait: A laboratory investigation; 2009; Article; Journal; Review of Economic Studies; Oprea, R.; Friedman, D.; Anderson, S. T. |
| URL (THUMBNAIL): | http://pubs.er.usgs.gov/thumbnails/outside_thumb.jpg |
| URL (DIGITAL OBJECT IDENTIFIER): | http://dx.doi.org/10.1111/j.1467-937X.2009.00543.x |
| Date Other: | Thu, 1 Jan 2009 00:00 -0600 |
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