Research Article Open Access

A Laboratory Study of Bayesian Updating in Small Feedback-Based Decision Problems

Takemi Fujikawa1 and Sobei H. Oda2
  • 1 School of Economics and Finance, University of Western Sydney, Australia
  • 2 Faculty of Economics, Kyoto Sangyo University, Japan

Abstract

This study explores small feedback-based decision problems experimentally. Conducted were the experiments in which the decision-maker’s payoff distribution was limited to either favorable distribution or unfavorable distribution. The first remarkable observation revealed complexity/loss aversion in the experiment. The second observation included the law of small numbers. Deviations from maximization were also observed. Finally, we investigated the imperfect Bayesian decision-makers observed in the experiment by exploring to what extent the decision-makers could update subjective Bayesian probability and rely on it in making decisions.

American Journal of Applied Sciences
Volume 2 No. 7, 2005, 1129-1133

DOI: https://doi.org/10.3844/ajassp.2005.1129.1133

Submitted On: 3 May 2005 Published On: 31 July 2005

How to Cite: Fujikawa, T. & Oda, S. H. (2005). A Laboratory Study of Bayesian Updating in Small Feedback-Based Decision Problems. American Journal of Applied Sciences, 2(7), 1129-1133. https://doi.org/10.3844/ajassp.2005.1129.1133

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Keywords

  • Sequential search
  • Bayesian updating
  • small feedback-based decision problems
  • experiment
  • JEL Classification: C91
  • D81
  • D83