When can it make sense to throw away payoffs?

We investigate when destroying payoff can be beneficial in a learning process of a boundedly rational, risk averse agent. Destroying payoff reduces average returns but can - as a "self punishment" - accelerate learning. This smoothens payoffs and can thereby increase expected utility.

Metadaten
Author:	Felix Höffler
URN:	urn:nbn:de:hbz:992-opus4-5184
Series (Serial Number):	WHU – Working Paper Series in Economics (WP 09/01)
Publisher:	WHU - Otto Beisheim School of Management
Place of publication:	Vallendar
Document Type:	Working Paper
Language:	English
Date of Publication (online):	2017/11/23
Date of first Publication:	2009/07/21
Release Date:	2017/11/23
Tag:	Eingeschränkte Rationalität; Kostensenkung; Lernen Bounded rationality; Learning; Sunk costs
Page Number:	14
Institutes:	WHU Economics Group / Lehrstuhl für Volkswirtschaftslehre, insbesondere für Regulierungsökonomik und Stiftungslehrstuhl der Deutsche Post Stiftung
JEL-Classification:	C Mathematical and Quantitative Methods / C7 Game Theory and Bargaining Theory / C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
	D Microeconomics / D8 Information, Knowledge, and Uncertainty / D81 Criteria for Decision-Making under Risk and Uncertainty
	D Microeconomics / D8 Information, Knowledge, and Uncertainty / D83 Search; Learning; Information and Knowledge; Communication; Belief
Licence (German):	Copyright for this publication

Open Access