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Search and Satisficing

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  • Andrew Caplin
  • Mark Dean
  • Daniel Martin

Abstract

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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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 101 (2011)
Issue (Month): 7 (December)
Pages: 2899-2922

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Handle: RePEc:aea:aecrev:v:101:y:2011:i:7:p:2899-2922

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References

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  1. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2006. "Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model," American Economic Review, American Economic Association, American Economic Association, vol. 96(4), pages 1043-1068, September.
  2. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(1), pages 113-26, February.
  3. Campbell, Donald E, 1978. "Realization of Choice Functions," Econometrica, Econometric Society, Econometric Society, vol. 46(1), pages 171-80, January.
  4. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, Econometric Society, vol. 62(6), pages 1251-89, November.
  5. Rubinstein, Ariel & Salant, Yuval, 2006. "A model of choice from lists," Theoretical Economics, Econometric Society, Econometric Society, vol. 1(1), pages 3-17, March.
  6. Eliaz, Kfir & Spiegler, Ran, 2009. "Consideration Sets and Competitive Marketing," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7456, C.E.P.R. Discussion Papers.
  7. Elena Reutskaja & Rosemarie Nagel & Colin F. Camerer & Antonio Rangel, 2011. "Search Dynamics in Consumer Choice under Time Pressure: An Eye-Tracking Study," American Economic Review, American Economic Association, American Economic Association, vol. 101(2), pages 900-926, April.
  8. Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, American Economic Association, vol. 97(5), pages 1824-1839, December.
  9. Ok, Efe A., 2002. "Utility Representation of an Incomplete Preference Relation," Journal of Economic Theory, Elsevier, vol. 104(2), pages 429-449, June.
  10. Pavlo R. Blavatskyy & Ganna Pogrebna, 2010. "Models of stochastic choice and decision theories: why both are important for analyzing decisions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 25(6), pages 963-986.
  11. Andrew Caplin & Mark Dean & Daniel Martin, 2011. "Search and Satisficing," American Economic Review, American Economic Association, American Economic Association, vol. 101(7), pages 2899-2922, December.
  12. Nakajima, Daisuke & Masatlioglu, Yusufcan, 2013. "Choice by iterative search," Theoretical Economics, Econometric Society, Econometric Society, vol. 8(3), September.
  13. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 69, pages 213.
  14. Caplin, Andrew & Dean, Mark, 2011. "Search, choice, and revealed preference," Theoretical Economics, Econometric Society, Econometric Society, vol. 6(1), January.
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Cited by:
  1. Elena Reutskaja & Rosemarie Nagel & Colin F. Camerer & Antonio Rangel, 2011. "Search Dynamics in Consumer Choice under Time Pressure: An Eye-Tracking Study," American Economic Review, American Economic Association, American Economic Association, vol. 101(2), pages 900-926, April.
  2. Caplin, Andrew & Dean, Mark, 2011. "Search, choice, and revealed preference," Theoretical Economics, Econometric Society, Econometric Society, vol. 6(1), January.
  3. Andrew Caplin & Mark Dean, 2014. "Revealed Preference, Rational Inattention, and Costly Information Acquisition," NBER Working Papers 19876, National Bureau of Economic Research, Inc.
  4. Daniela Di Cagno & Tibor Neugebauer & Carlos Rodriguez-Palmero & Abdolkarim Sadrieh, 2014. "Recall Searching with and without Recall," Working Papers, Economics Department, Universitat Jaume I, Castellón (Spain) 2014/14, Economics Department, Universitat Jaume I, Castellón (Spain).
  5. Andrew Caplin & Mark Dean & Daniel Martin, 2011. "Search and Satisficing," American Economic Review, American Economic Association, American Economic Association, vol. 101(7), pages 2899-2922, December.
  6. Papi, Mauro, 2013. "Satisficing and maximizing consumers in a monopolistic screening model," Mathematical Social Sciences, Elsevier, Elsevier, vol. 66(3), pages 385-389.
  7. Andrei Gomberg, 2011. "Vote Revelation: Empirical Characterization of Scoring Rules," Working Papers, Centro de Investigacion Economica, ITAM 1102, Centro de Investigacion Economica, ITAM.
  8. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Ozbay, 2009. "Revealed Attention," NajEcon Working Paper Reviews 814577000000000409, www.najecon.org.
  9. Papi, Mauro, 2012. "Satisficing choice procedures," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 451-462.
  10. Axel Sonntag, 2013. "Search Costs in Consumer Product Choice: Does Delaying the Provision of Information increase Choice Efficiency?," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS), School of Economics, University of East Anglia, Norwich, UK. 13-05, School of Economics, University of East Anglia, Norwich, UK..

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