Age Effects and Heuristics in Decision Making
AbstractWe examine in controlled experiments how individuals make choices when faced with multiple options. The choice tasks mimic the selection of health insurance, prescription drug, or retirement savings plans. However, in our experiment, the available options can be objectively ranked. We find that the probability of a person selecting the optimal option declines as the number of options increases, with the decline more pronounced for older subjects. Heuristics seem to differ by age with older subjects relying more on suboptimal decision rules. Behavior consistent with the estimated decision rules is observed in an out-of-sample experiment.
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Bibliographic InfoPaper provided by Department of Economics, Louisiana State University in its series Departmental Working Papers with number 2009-03.
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- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-03-14 (Economics of Ageing)
- NEP-ALL-2009-03-14 (All new papers)
- NEP-CBE-2009-03-14 (Cognitive & Behavioural Economics)
- NEP-EXP-2009-03-14 (Experimental Economics)
- NEP-UPT-2009-03-14 (Utility Models & Prospect Theory)
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