A Test of the Principle of Optimality
Carbone, Enrica and Hey, John D. (1997) A Test of the Principle of Optimality. [Discussion Paper]. p. 21. Discussion Papers in Economics (No. 99/9).
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This paper reports on an experimental test of the Principle of Optimality in dynamic decision problems. This Principle, which states that the decision-maker should always choose the optimal decision at each stage of the decision problem, conditional on behaving optimally thereafter, underlies many theories of optimal dynamic decision making, but is normally difficult to test empirically without knowledge of the decision-maker's preference function. In the experiment reported here we use a new experimental procedure to get round this difficulty, which also enables us to shed some light on the decision process that the decision-maker is using if he or she is not using the Principle of Optimality - which appears to be the case in our experiments.
|Item Type:||Report / Paper (Discussion Paper)|
|Research documents and activity classification:||Working Papers > Refereed Working Papers / of international relevance|
|Divisions:||Department of Business and Management|
|Additional Information:||The definitive version of this paper has been published in "Theory and Decision" vol. 50 (3), Pages 263-281, May 2001|
|Uncontrolled Keywords:||Dynamic decision making, backward induction, principle of optimality, experiments, software.|
|MIUR Scientific Area:||Area 13 - Economics and Statistics > SECS-P/01 Political Economy|
|Deposited By:||Maria Teresa Nistico|
|Deposited On:||06 Dec 2010 09:46|
|Last Modified:||19 Apr 2013 23:13|
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