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Speed, Accuracy, and the Optimal Timing of Choices

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  • Drew Fudenberg
  • Philipp Strack
  • Tomasz Strzalecki

Abstract

We model the joint distribution of choice probabilities and decision times in binary decisions as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant cost per unit time for gathering information. We show that choices are more likely to be correct when the agent chooses to decide quickly provided that the agent?s prior beliefs are correct. This better matches the observed correlation between decision time and choice probability than does the classical drift-diffusion model, where the agent knows the utility difference between the choices.

Suggested Citation

  • Drew Fudenberg & Philipp Strack & Tomasz Strzalecki, 2015. "Speed, Accuracy, and the Optimal Timing of Choices," Working Paper 254346, Harvard University OpenScholar.
    • Handle: RePEc:qsh:wpaper:254346
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    File URL: http://scholar.harvard.edu/tomasz/node/254346
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    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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