TY  - JOUR
AU  - List,John A.
AU  - Haigh,Michael S.
TI  - Investment under Uncertainty: Testing the Options Model with Professional Traders
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16038
PY  - 2010
Y2  - May 2010
UR  - http://www.nber.org/papers/w16038
L1  - http://www.nber.org/papers/w16038.pdf
N1  - Author contact info:
John List
Department of Economics
University of Chicago
1126 East 59th
Chicago, IL 60637
Tel: 301/405-1288
Fax: 301/314-9091
E-Mail: jlist@uchicago.edu

Michael S. Haigh
U.S Commodity Futures Trading Commission
1155 21st Street NW
Washington, DC 20581
E-Mail: mhaigh@cftc.gov
AB  - An important class of investment decisions is characterized by unrecoverable sunk costs, resolution of uncertainty through time, and the ability to invest in the future as an alternative to investing today. The options model provides guidance in such settings, including an investment decision rule called the “bad news principle”: the downside investment state influences the investment decision whereas the upside investment state is ignored. This study takes a new approach to examining predictions of the options model by using the tools of experimental economics. Our evidence, which is drawn from student and professional trader subject pools, is broadly consonant with the options model.
ER  -