Modeling Decision Making Biases in the Context of a Market

摘要

The effects of two behavioral decision making biases are evaluated within the context of a system dynamics model of a market for a commodity, overconfidence and availability. Overconfidence is modeled as an increase in the percent of a trader's capital they are willing to commit to any trade and is found to have the effect of increasing profits for traders with good information relative to traders with poor information, as well as increasing the volatility of the returns for traders with good information more than for traders with poor information. The Availability Bias is modeled as a overweighting of information easily available to a trader and is found to have the effect of increasing the returns of traders with good information easily available to them and decreasing the returns of traders with poor information easily available.