An experimental analysis of bounded rationality: Applying insights from behavioral economics to information systems
AbstractThe paradigm of bounded rationality considers the limited ability of individuals to make consistent and rational choices. Due to the scarcity of research on this phenomenon in information systems, we conducted an experimental study investigating decision-making regarding risk preferences and social preferences. Moreover, we explored the stability of these preferences under different conditions and uncovered the role of information retrieval in individual decision-making. We find that although individuals are generally risk-averse and egoistic, none of these preferences is stable under the conditions tested which provides indices of boundedly rational decision-making. Although the information retrieved by participants generally allows to infer their preferences, the increasing amount and complexity of this information again often results in boundedly rational behavior.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2011-065.
Date of creation: 2011
Date of revision:
bounded rationality; experimental design; information retrieval; stability of attitudes and behavior; cognitive tracing; behavioral economics; behavioral information systems;
Find related papers by JEL classification:
- C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-18 (All new papers)
- NEP-CBE-2012-01-18 (Cognitive & Behavioural Economics)
- NEP-EVO-2012-01-18 (Evolutionary Economics)
- NEP-EXP-2012-01-18 (Experimental Economics)
- NEP-UPT-2012-01-18 (Utility Models & Prospect Theory)
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