Abstract

http://ssrn.com/abstract=1336724
 
 

References (51)



 
 

Citations (1)



 


 



Learning to Detect Change


Ye Li


University of California, Riverside - Department of Management and Marketing; Center for Decision Sciences, Columbia University

Cade Massey


University of Pennsylvania - The Wharton School

George Wu


University of Chicago - Booth School of Business

January 30, 2009

Chicago Booth School of Business Research Paper No. 09-03

Abstract:     
People, across a wide range of personal and professional domains, need to detect change accurately. Previous research has documented systematic shortcomings in doing so, in particular, a pattern of over- and under-reaction to indications of change, resulting from a tendency to overweight signals of change at the expense of the environment that produces the signals. This investigation considers whether this pattern persists when participants are given the opportunity to learn. We find that the pattern of system neglect does persist, but that the impact of experience varies greatly across environments -- participants show reliable improvement in some conditions and virtually none in others. We explain this differential learning by formally characterizing environments in terms of the extent to which they: (i) provide consistent feedback; and (ii) tolerate non-optimal behavior. Whereas we find that learning is related to consistent feedback, the stronger -- and perhaps more surprising -- finding is that more learning occurs in environments that are more tolerant of non-optimal behavior.

Number of Pages in PDF File: 33

Keywords: change-point detection, regime shifts, learning, overreaction, underreaction, Bayesian updating

JEL Classification: C91, D83

working papers series





Download This Paper

Date posted: February 2, 2009 ; Last revised: February 5, 2009

Suggested Citation

Li, Ye and Massey, Cade and Wu, George, Learning to Detect Change (January 30, 2009). Chicago Booth School of Business Research Paper No. 09-03. Available at SSRN: http://ssrn.com/abstract=1336724 or http://dx.doi.org/10.2139/ssrn.1336724

Contact Information

Ye Li (Contact Author)
University of California, Riverside - Department of Management and Marketing ( email )
United States
Center for Decision Sciences, Columbia University
New York, NY
United States
Cade Massey
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
George Wu
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,404
Downloads: 366
Download Rank: 45,664
References:  51
Citations:  1
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.297 seconds