Why do people not reject decisions, which with hindsight are unfavourable? The "drink order paradox" seems to be similar to the subject of following paper:
"Illusion of Expertise in Portfolio Decisions: An Experimental Approach" GERLINDE FELLNER, WERNER GUETH, BORIS MACIEJOVSKY ABSTRACT: Overall, 72 subjects invest their endowment in four risky assets. Each combination of assets yields the same expected return and variance of returns. Illusion of expertise prevails when one prefers nevertheless the self-selected portfolio. After being randomly assigned to groups of four, subjects are asked to elect their "expert" based on responses to a prior decision task. Using the random price mechanism reveals that 64% of the subjects prefer their own portfolio over the average group portfolio or the expert's portfolio. Illusion of expertise is shown to be stable individually, over alternatives, and for both eliciting methods, willingness to pay and to accept. Keywords: Investment Decisions, Portfolio Selection, Overconfidence, Unrealistic Optimism, Illusion of Control, Endowment Effect http://papers.ssrn.com/sol3/papers.cfm?abstract_id=296121 Steffen -----Original Message----- From: Bryan D Caplan [mailto:[EMAIL PROTECTED]] Sent: Monday, February 04, 2002 4:55 AM To: [EMAIL PROTECTED] Subject: Re: drink prices Joel Simon Grus wrote: > (1) Where else do people buy things without knowing the price first? > (I've been thinking and have been unable to come up with any examples.) Hotel phone calls. Also, in restaurants people often order drinks before they see the menu. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "Who are they? Why are they running? Could they be coming to me? Really coming to me? And why? To kill me? *Me* whom everyone loves?" Leo Tolstoy, *War and Peace*
