English, Article edition: Learning to Wait: A Laboratory Investigation RYAN OPREA; DANIEL FRIEDMAN; STEVEN T. ANDERSON

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Learning to Wait: A Laboratory Investigation
Author
  • RYAN OPREA
  • DANIEL FRIEDMAN
  • STEVEN T. ANDERSON
Physical Description
  • article
Notes
  • 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. Copyright Copyright © 2009 The Review of Economic Studies Limited.
  • RePEc:bla:restud:v:76:y:2009:i:3:p:1103-1124
Language
  • English
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