Strategies, heuristics, and the relevance of risk-aversion in a dynamic decision problem
AbstractIn this paper I consider a complex decision problem where subjects have to cope with a time horizon of uncertain duration and must update their termination probabilities which depend on stochastic events during life. First I describe how economic theory suggests to solve the decision problem. But since real decision makers can hardly be expected to behave according to the theoretical solution in the problem at hand, I describe several heuristics or rules of thumb and investigate their theoretical performance. Then observed behavior and the way how people tackled the problem is described. In the second part of the paper I discuss how much of the data can be explained by assuming that experimental subjects are risk averse. --
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Psychology.
Volume (Year): 22 (2001)
Issue (Month): 4 (August)
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Web page: http://www.elsevier.com/locate/joep
Other versions of this item:
- Müller, Wieland, 1999. "Strategies, heuristics and the relevance of risk aversion in a dynamic decision problem," SFB 373 Discussion Papers 1999,61, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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