American Economic Review · 2011 · 338 citations · 29 references
Social SciencesDecision SciencesEconomicsBehavioral EconomicsDecision MakingExperimental EconomicsBehavioral Decision-makingChoice BehaviorChoice ModelingDiscrete Choice ModelsSequential Decision-makingUtility TheoryChoice ProcedureConsumer Choice Under Incomplete InformationDiscrete Choice Experiment DesignReservation UtilitySequential ChoiceSequential SearchSubjects
Many everyday decisions are made without full examination of all available options, so the best option may be missed. The study develops a search‑theoretic choice experiment to examine how incomplete consideration affects choice quality. The experiment tracks subjects’ sequential search and stopping behavior to assess reservation utilities. Results show that most subjects use a satisficing strategy, stopping when a reservation utility threshold is met, and that both reservation utilities and search order systematically vary with the decision environment. JEL classification: D03, D12, D83.
Many everyday decisions are made without full examination of all available options, and, as a result, the best available option may be missed. We develop a search-theoretic choice experiment to study the impact of incomplete consideration on the quality of choices. We find that many decisions can be understood using the satisficing model of Herbert Simon (1955): most subjects search sequentially, stopping when a “satisficing” level of reservation utility is realized. We find that reservation utilities and search order respond systematically to changes in the decision making environment. (JEL D03, D12, D83)
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