RSSE Martijn van den Assem (Vrije Universiteit Amsterdam) High-Stakes Failures of Backward Induction

It is our pleasure that prof. Martijn van den Assem (Vrije Universiteit Amsterdam) will present on Thursday, April 13, 2023, at 12:45 in room RB437 about his research on the topic „High-Stakes Failures of Backward Induction“.

Registration is not required and anyone who would like to attend is warmly invited.

BIO: He is a Professor of Finance at Vrije Universiteit (VU) Amsterdam. The scope of his chair is judgment and decision-making. He is affiliated with the Tinbergen Institute as a Research Fellow (TI) and serves as an Associate Editor for the Journal of Economic Behavior & Organization (JEBO). He is one of the founders and organizers of the biennial Research in Behavioral Finance Conference (RBFC) series. He works on themes in the fields of financial and behavioral economics. His main research interests are related to judgment and decision-making. Most of his research projects are empirical and use data from unconventional sources such as television game shows, lotteries, and sports. You can visit his personal homepage for an overview of his publications.

Abstract: We examine high-stakes strategic choice using more than 40 years of data from the American TV game show The Price Is Right. In every episode, contestants play the Showcase Showdown, a sequential game of perfect information for which the optimal strategy can be found through backward induction. We find that contestants systematically deviate from the subgame perfect Nash equilibrium. These departures from optimality are well explained by a modified agent quantal response model that allows for limited foresight. The results suggest that many contestants simplify the decision problem by adopting a myopic representation and optimize their chances of beating the next contestant only. In line with learning, contestants' choices improve over the course of our sample period.