The Affects on Expected Market Outcomes when People Look for Information Where There is None Drew Marticorena Ashleigh Edwards

Round Position Round 1 round 2 round %$23$22 2 None48%40% 3 48%44%46% 4 $2434%42% 5 46%$2036% 6 $23none$18 7 $22$2444% 8 36%46%$ %$1948% 10 None42%$21 11 $20$1838% 12 30%$22$ %40%$20 14 Nonenone32% 15 $21$1630% 16 None30%$ %36%34% 18 $19$15none 19 38%$21$23 20 $16none$ %38%$16 22 $1832% 23 $15$17 24 $17

Things to Notice People clearly not playing the strongly dominating strategy People clearly not playing the strongly dominating strategy Always choose the good with the highest expected value and if indifferent, choose randomly Always choose the good with the highest expected value and if indifferent, choose randomly People are looking to play to a pattern that does not actually exist People are looking to play to a pattern that does not actually exist Causes later systematic deviations in the data from expected values Causes later systematic deviations in the data from expected values

Expectations of Experiment People should always purchase a good People should always purchase a good Expected Value of any given good is a net value of 27.5 to 36.5 Expected Value of any given good is a net value of 27.5 to 36.5 People will systematically purchase a certain type of discount after previous person passes on purchasing second good People will systematically purchase a certain type of discount after previous person passes on purchasing second good If the previous person fails to purchase a second good the next person will, above chance, select the opposite type of discount If the previous person fails to purchase a second good the next person will, above chance, select the opposite type of discount

Data: The Beginning # of No Purchases Difference in Goods Around None # of Rebates Chosen # of Sales Chosen Good Purchased After Round 1 43 First 01Sale Second 35Rebate Third 47Rebate Fourth 57Sale Round 2 32 First 23Rebate Second 66Rebate Third 98Sale Round 3 11 First 710Rebate

What the previous table tells us: When people choose the less advantageous good – a Poor Good (defined by the expected value for each set of goods) they will more often choose the sale discount When people choose the less advantageous good – a Poor Good (defined by the expected value for each set of goods) they will more often choose the sale discount They possibly give it additional weight because of how it is framed They possibly give it additional weight because of how it is framed People do seem to interpret another player choosing not to purchase a good as a signal, more often switching away from the discount that the previous person chose on the first part of their turn People do seem to interpret another player choosing not to purchase a good as a signal, more often switching away from the discount that the previous person chose on the first part of their turn 6/8 times vs. expected 4/8 times 6/8 times vs. expected 4/8 times

Type of good selected before No Good is purchased PoorGood Excellent Good # of No Purchases in Round Round Round Round 3 011

Breakdown of Consistent Turns Each Round # of Turns in Round # of Turns Consistent # of No Purchases Round Round Round A consistent turn is one in which two of the same type of discount is purchased

Data: The End # of Consistent Turns starting with Excellent Good # of Turns Starting With Excellent Good # of Turns Starting With Poor Good # of Consistent Turns Starting with Poor Good Round Round Round

How did our hypothesis hold up? People purchase goods more often as the game progresses People purchase goods more often as the game progresses This is consistent with our expectations This is consistent with our expectations People are just as likely to purchase No Good after purchasing an Excellent Good as they are after purchasing a Poor Good People are just as likely to purchase No Good after purchasing an Excellent Good as they are after purchasing a Poor Good This is not consistent with our hypothesis This is not consistent with our hypothesis

Results from Experiment People are likely to choose a different type of discount (sale versus rebate) after purchasing an Excellent Good than vice versa (switching on 14/15 opportunities) People are likely to choose a different type of discount (sale versus rebate) after purchasing an Excellent Good than vice versa (switching on 14/15 opportunities) If people weren’t deriving information from one of the types of goods, we would expect them to choose each type of good 50% of the time If people weren’t deriving information from one of the types of goods, we would expect them to choose each type of good 50% of the time

People seem to believe that if their first good is a Poor Good they should stick with the same type of discount because an Excellent one is “due to come up” People seem to believe that if their first good is a Poor Good they should stick with the same type of discount because an Excellent one is “due to come up” Occurred in 4/20 opportunities Occurred in 4/20 opportunities This is compared to when an Excellent Good comes up first, in which case people expect it to switch to a Poor Good next This is compared to when an Excellent Good comes up first, in which case people expect it to switch to a Poor Good next Occurred in 1/15 opportunities Occurred in 1/15 opportunities Not significant but trending towards expectations Not significant but trending towards expectations

Conclusion There was an Average Loss made per round due to failure to purchase goods There was an Average Loss made per round due to failure to purchase goods People overcame this non-profit maximizing behavior with practice People overcame this non-profit maximizing behavior with practice Very small effect in this experiment, but we would expect other influential factors in real-world settings Very small effect in this experiment, but we would expect other influential factors in real-world settings Loss in Earnings per Round: Loss in Earnings per Round: Round 17.5 Round Round