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Aspiration formation and satisficing in isolated and competitive search

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Author Info

  • Werner Güth

    ()

  • Ev Martin

    ()

  • Torsten Weiland

    ()

Abstract

We experimentally explore individual and interactive decision making in a sequential search task and test whether generally accepted principles of bounded rationality (aspiration formation, satisficing, and aspiration adjustment) adequately explain the observed search behavior. Subjects can, at a cost, employ screening and selection methods facilitating their search and revealing their aspirations. The majority of subjects seems to follow the single threshold heuristic after extensive experimentation. Contrary to popular theories of sequential search, aspiration levels are set below the maximum value of all previously inspected alternatives. In a competitive search subjects tend to experiment less before engaging in satisficing and generally state lower aspirations. Finally, systematic satisficing seems to significantly enhance payoffs.

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Bibliographic Info

Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2006-26.

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Length: 41 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:esi:discus:2006-26

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Related research

Keywords: sequential search; secretary problem; optimal stopping; bounded rationality;

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  1. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
  2. Seale, Darryl A. & Rapoport, Amnon, 1997. "Sequential Decision Making with Relative Ranks: An Experimental Investigation of the "Secretary Problem">," Organizational Behavior and Human Decision Processes, Elsevier, vol. 69(3), pages 221-236, March.
  3. Selten, Reinhard, 1998. "Features of experimentally observed bounded rationality," European Economic Review, Elsevier, vol. 42(3-5), pages 413-436, May.
  4. Thomas Dudey & Peter Todd, 2001. "Making Good Decisions with Minimal Information: Simultaneous and Sequential Choice," Journal of Bioeconomics, Springer, vol. 3(2), pages 195-215, May.
  5. Gerlinde Fellner & Werner Güth & Boris Maciejovsky, 2005. "Satisficing in Financial Decision Making A Theoretical and Experimental Attempt to Explore Bounded Rationality," Papers on Strategic Interaction 2005-23, Max Planck Institute of Economics, Strategic Interaction Group.
  6. Todd, Peter M. & Rieskamp, Jörg & Gigerenzer, Gerd, 2008. "Social Heuristics," Handbook of Experimental Economics Results, Elsevier.
  7. Rami Zwick & Amnon Rapoport & Alison King Chung Lo & A. V. Muthukrishnan, 2001. "Consumer Search: Not Enough Or Too Much?," Experimental 0110002, EconWPA.
  8. Tietz, Reinhard, 1992. "Semi-normative theories based on bounded rationality," Journal of Economic Psychology, Elsevier, vol. 13(2), pages 297-314, June.
  9. Kogut, Carl A., 1990. "Consumer search behavior and sunk costs," Journal of Economic Behavior & Organization, Elsevier, vol. 14(3), pages 381-392, December.
  10. Massimo Egidi, 1995. "Routines, Hierarchies of Problems, Procedural Behaviour: Some Evidence fom Experiments," CEEL Working Papers 9503, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
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