The Satisficer's Curse
10 Pages Posted: 23 Oct 2013
Date Written: October 16, 2013
Following the Winner’s Curse and the Optimizer’s Curse, this paper introduces the Satisficer’s Curse. The Winner’s Curse requires competition between agents in an auction for, usually, a common-value item; the Optimizer’s Curse is a systematic overvaluation when the decision maker is choosing the highest-valued prospect of a set of uncertain future outcomes. The Satisficer’s Curse is a systematic overvaluation that occurs when any uncertain prospect is chosen because its estimate exceeds a positive threshold. It is the most general version of the three curses, all of which can be seen as statistical artefacts.
Keywords: decision analysis, investment, probability, ex-post disappointment, winner's curse
JEL Classification: D81, C44, G11
Suggested Citation: Suggested Citation