Psy 205 Zack Brown

Psy 205 Zack Brown - entrants The game is designed to...

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Psy 205 Our economy is a very complicated thing. One aspect of it is the number of people involved. The more people that are involve in any particular market, the less profits there are for each person involved. When the number of people competing for the same market exceeds the market capacity the market reaches a breaking point and someone has to lose money. The article that I read, entitled Market Entry Decisions: Effects of Absolute and Relative Confidence tried to figure out why people enter markets as opposed to staying out of them. They were trying to test “The hypothesis that overconfidence is responsible for excessive entry on skill-based rounds of a MEG and, by implication, in real-world competitive markets also.” A MEG is a Market Entry Game, which has a group of people, and they repeatedly make them decide whether or not to enter a market. They are not given any information about the market other than the number of
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Unformatted text preview: entrants. The game is designed to simulate real world markets, in which the per capita profit is inversely proportional to the number of entrants in that particular market. They also measured the level of confidence for each player. What they found was that when given very little information about these “markets” their decisions were based almost completely on confidence. This is because they used the behaviors of other people, relative to their own without communicating with one another. The conclusion that they drew was that these decisions were incredibly accurate. This proves that people have an intuition that is very often right, when they know the behavioral patterns of other people they are competing against. The implications of these findings are that people who study economical psychology now know that people base many of their decisions on confidence, and the behavior of others....
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