Journal article
The relevance of thinking-by-analogy for investors' willingness-to-pay: An experimental study
Journal of Economic Psychology, Vol.33(1), pp.19-29
2012
Abstract
People tend to think by analogies. We investigate whether thinking-by-analogy matters for investors' willingness-to-pay for a risky asset in a laboratory experiment. We find that thinking-by-analogy has a strong influence when the assets in question have similar (but not identical) payoffs. The hypothesis of thinking-by-analogy or coarse thinking clearly outperforms other hypotheses including the hypothesis of arbitrage-free or rational pricing. When the similarity between the payoffs is reduced, the risk neutral and risk averse hypotheses outperform the hypothesis of thinking-by-analogy. Regardless of the similarity between the payoffs, the arbitrage-free or rational pricing remains the hypothesis with the worst performance. © 2011 Elsevier B.V.
Details
- Title
- The relevance of thinking-by-analogy for investors' willingness-to-pay: An experimental study
- Authors
- Hammad Siddiqi (Author) - Lahore University of Management Sciences, Pakistan
- Publication details
- Journal of Economic Psychology, Vol.33(1), pp.19-29
- Publisher
- Elsevier BV
- Date published
- 2012
- DOI
- 10.1016/j.joep.2011.08.008
- ISSN
- 0167-4870
- Organisation Unit
- School of Business and Creative Industries; University of the Sunshine Coast, Queensland; USC Business School - Legacy
- Language
- English
- Record Identifier
- 99450986602621
- Output Type
- Journal article
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- Economics
- Psychology, Multidisciplinary
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