Information and Investor Behavior in the Acquiring-a-Company Game

This paper reports an experimental study examining decision-making biases in the acquiring-a-company (AC) game. We examine investment behavior across 40 rounds of the AC game under conditions of risk and ambiguity. Initial experimental phases reveal participant decisions consistent with ambiguity-seeking behavior: Investors in the ambiguity scenario submit significantly greater prices than those in the risk scenario. For the first 20 rounds of the experiment, we observe radical price adjustments towards the optimal choice in both scenarios; and the price difference between the two scenarios declines as the experiment proceeds. Interestingly, gambler's fallacy has a remarkable influence on investors' dynamic bidding behavior.