Through a series of decision tasks involving colored cards, we provide
separate measures of Bayesian updating and non-probabilistic
reasoning skills. We apply these measures to (and are the first to
study) a common-value Dutch auction. This format is more salient
than the strategically equivalent first-price auction and silent Dutch
formats in hinting that one should condition one's estimate of the
value on having the highest bid. Both Bayesian updating skills and
non-probabilistic reasoning skills are shown to help subjects correct
for the winner's curse, as does the saliency of the active-clock Dutch
format. (JEL D12, D44, D83)
Levin, Dan, James Peck, and Asen Ivanov.
"Separating Bayesian Updating from Non-Probabilistic Reasoning: An Experimental Investigation."
American Economic Journal: Microeconomics,
Consumer Economics: Empirical Analysis
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