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Decomposition Patterns in Problem Solving

In: Cognitive Economics: New Trends

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  • Massimo Egidi

Abstract

The paper develops a theory of biases in decision making. Discovering a strategy for solving a game is a complex problem that may be solved by decomposition; a player decomposing a problem into many simple sub- problems may easily identify the optimal solution to each sub-problem: however it is shown that even though all partial solutions are optimal, the solution to the global problem may be largely sub-optimal. The conditions under which a decomposition process gives rise to a sub- optimal solution are explored, and it is shown that the sub-optimalities ultimately originate from the process of categorization that governs the creation of a decomposition pattern. Decisions based on a strategy discovered by decomposition are therefore frequently biased . The persistence of biased behaviours, observed in many experiments, is explained by showing the stability of different and non optimal representations of the same problem. An application to a simplified version of Rubik cube is finally developed.
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Suggested Citation

  • Massimo Egidi, 2006. "Decomposition Patterns in Problem Solving," Contributions to Economic Analysis, in: Cognitive Economics: New Trends, pages 15-46, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:ceazzz:s0573-8555(06)80002-7
    DOI: 10.1016/S0573-8555(06)80002-7
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    References listed on IDEAS

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    1. Egidi, Massimo & Narduzzo, Alessandro, 1997. "The emergence of path-dependent behaviors in cooperative contexts," International Journal of Industrial Organization, Elsevier, vol. 15(6), pages 677-709, October.
    2. Cohen, Michael D, et al, 1996. "Routines and Other Recurring Action Patterns of Organizations: Contemporary Research Issues," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 5(3), pages 653-698.
    3. Michael D. Cohen & Paul Bacdayan, 1994. "Organizational Routines Are Stored as Procedural Memory: Evidence from a Laboratory Study," Organization Science, INFORMS, vol. 5(4), pages 554-568, November.
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    Cited by:

    1. Guido Fioretti, 2005. "Credit Rationing and Internal Ratings in the face of Innovation and Uncertainty," Finance 0504021, University Library of Munich, Germany.
    2. Massimo Egidi, 2012. "The Cognitive Explanation of Economic Behavior: From Simon to Kahneman," Chapters, in: Richard Arena & Agnès Festré & Nathalie Lazaric (ed.), Handbook of Knowledge and Economics, chapter 9, Edward Elgar Publishing.

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    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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