How a professor sells 20-dollar note to Harvard Business School students - MQL4 and MetaTrader 4

Владимир Тезис 2013.06.13 23:23 #1171

Every year, Professor Max Bazerman sells MBA students from Harvard Business School a twenty-dollar note well above face value. His record is selling $20 for $204. And he does it this way.

He shows the note to the class and tells them that he will give $20 to the person who gives the most money for it. There is, however, a small condition. The person who was right behind the winner will have to give the professor the amount he was willing to give for the $20.

To be clear - let's say the two highest bids were $15 and $16. The winner gets $20 in exchange for $16, and the second person would have to give the professor $15. Those are the terms.
Bidding starts at one dollar and quickly reaches $12-$16. At this point, most students drop out of the auction and only the two people with the highest bids remain. Slowly but surely the auction approaches the $20 figure.

Obviously, it's impossible to win, but one doesn't want to lose either, for the loser not only gets nothing, he will also have to pay the professor the face value of his last bid.
As soon as the auction crosses the $21 mark, the class bursts into laughter. MBA students, supposedly so smart, are willing to pay above par for a twenty-dollar note. Indeed -comical and very aptly describes the behaviour of MBA holders.

However, the auction goes on and quickly reaches $50, then a hundred, all the way up to $204 - Bazerman's record for his teaching career. Incidentally, during his training sessions, the professor does the same trick with top managers and CEOs of large companies - and always sells $20 above face value (the money raised is spent on charity).

Why do people invariably pay more money for twenty dollars, and what is the professor trying to show? Humans, especially in business, have a weakness - loss aversion or fear of loss. Numerous experiments show that people behave extremely irrationally and even inadequately when they start to lose money.

At first all students think that they have an opportunity to get free money. After all, they are not fools and will not pay more than twenty quid for a twenty-dollar note. However, as soon as the bidding reaches $12-$16, the second person realizes that he is in danger of losing a lot, so he starts bidding more than he intends to, until the auction reaches $21. At this point both bidders will lose money. But one will lose only a dollar, and the other twenty. To minimise losses, each person tries to be the winner. However, this race only results in both bidders losing more and more money, until the size of the losses reaches such an amount that it simply does not make sense to dig the hole any deeper.

Thus, the desire to get a free twenty turns out to be a loss. Best of all, there is a wealth of data - especially in the stock market and casinos - that shows the Bazerman phenomenon in action. A person begins to lose money. Instead of locking in a loss, he hopes he can win back the loss - and almost always loses more and more money.

[Archive c 17.03.2008] Humour Interesting and humorous (politics Interesting and Humour

Ekvador 2013.06.16 15:18 #1172

This $20 principle clearly describes the martingale or grid pattern =)"Instead of fixing the loss, he hopes he can win back the loss - and almost always loses more and more money. "

solar 2013.06.16 16:00 #1173

OmegaTube:
This $20 principle clearly describes the martingale or grid pattern =)"Instead of fixing the loss, he hopes he can win back the loss - and almost always loses more and more money. "

this approach mirrors the principle of pricing in markets. sit - two.