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Mathematics

Game theory shows we can never learn perfectly from our mistakes

An analysis of a mathematical economic game suggests that even learning from past mistakes will almost never help us optimise our decision-making – with implications for our ability to make the biggest financial gains

By Karmela Padavic-Callaghan

9 May 2024

traders in stock market

When people trade stocks, they don’t always learn from experience

Bill Ross/Getty Images

Even when we learn from past mistakes, we may never become optimal decision-makers. The finding comes from an analysis of a mathematical game that simulates a large economy, and suggests we may need to rethink some of the common assumptions built into existing economic theories.

In such theories, people are typically represented as rational agents who learn from past experiences to optimise their performance, eventually reaching a stable state in which they know how to maximise their earnings. This assumption…

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