http://www.theamateurfinancier.com/blog/your-mind-and-your-money-irrational-escalation-of-commitment/ Thoughts on Money, Investing and Life Thu, 09 Feb 2012 04:45:50 +0000 hourly 1 http://wordpress.org/?v=3.2.1 http://www.theamateurfinancier.com/blog/your-mind-and-your-money-irrational-escalation-of-commitment/#comment-897 How to teach children decision-making and choices with game theory problems | Ingathered Sat, 06 Feb 2010 21:56:04 +0000 http://www.theamateurfinancier.com/blog/?p=1534#comment-897 [...] Dollar Auction – the parent auctions off a $100 Monopoly bill (or 10 chocolate chips). The player bidding the highest amount pays that amount and gets the prize. The runner-up also pays whatever he bids, but gets nothing. The problem becomes apparent when the bids reach the value of the prize, but the players continue bidding to stave off their losses. We frequently experience similar situation when after investing into something, we hesitate to desist even when we are clearly in for a loss. (If you have ever spent 10 minutes on the line waiting for a customer service representative, you know what I am talking about). For adults – here is how this issue applies to your money. [...] [...] Dollar Auction – the parent auctions off a $100 Monopoly bill (or 10 chocolate chips). The player bidding the highest amount pays that amount and gets the prize. The runner-up also pays whatever he bids, but gets nothing. The problem becomes apparent when the bids reach the value of the prize, but the players continue bidding to stave off their losses. We frequently experience similar situation when after investing into something, we hesitate to desist even when we are clearly in for a loss. (If you have ever spent 10 minutes on the line waiting for a customer service representative, you know what I am talking about). For adults – here is how this issue applies to your money. [...]

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