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| Author: | Berk, J. Hughson, E. Wandezande, K. |
| Title: | The price is right, but are the bids? An investigation of rational decision theory |
| Journal: | American Economic Review
1996 : SEP, VOL. 86:4, p. 954-970 |
| Index terms: | ECONOMICS PRICING DECISION THEORY |
| Language: | eng |
| Abstract: | The television game show "The Price Is Right" is used as a laboratory to conduct a preference-free test of rational decision theory in an environment with substantial economic incentives. It is found that contestants' strategies are transparently suboptimal. In response to this evidence, simple rules of thumb are developed which are shown to explain observed bidding patterns better than rational decision theory. Further, learning during the show reduces the frequency of strategic errors. |
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