Take-the-best and other simple strategies: Why and when they work 'well' in binary choice
AbstractThe effectiveness of decision rules depends on characteristics of both rules and environments. A theoretical analysis of environments specifies the relative predictive accuracies of the lexicographic rule 'take-the-best' (TTB) and other simple strategies for binary choice. We identify three factors: how the environment weights variables; characteristics of choice sets; and error. For cases involving from three to five binary cues, TTB is effective across many environments. However, hybrids of equal weights (EW) and TTB models are more effective as environments become more compensatory. In the presence of error, TTB and similar models do not predict much better than a naïve model that exploits dominance. We emphasize psychological implications and the need for more complete theories of the environment that include the role of error.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 709.
Date of creation: Oct 2003
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Web page: http://www.econ.upf.edu/
Decision making; bounded rationality; lexicographic rules; Leex;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- M10 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-26 (All new papers)
- NEP-DCM-2004-05-26 (Discrete Choice Models)
- NEP-EVO-2004-05-16 (Evolutionary Economics)
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- Nathan Berg & G. Biele & Gerd Gigerenzer, 2013.
"Does Consistency Predict Accuracy of Beliefs?: Economists Surveyed About PSA,"
1308, University of Otago, Department of Economics, revised Apr 2013.
- Berg, Nathan & Biele, Guido & Gigerenzer, Gerd, 2010. "Does Consistency Predict Accuracy of Beliefs?: Economists Surveyed About PSA," MPRA Paper 24976, University Library of Munich, Germany.
- Berg, Nathan & Biele, Guido & Gigerenzer, Gerd, 2010. "Does consistency predict accuracy of beliefs?: Economists surveyed about PSA," MPRA Paper 26590, University Library of Munich, Germany.
- Clintin Davis-Stober, 2011. "A Geometric Analysis of When Fixed Weighting Schemes Will Outperform Ordinary Least Squares," Psychometrika, Springer, vol. 76(4), pages 650-669, October.
- Robin Hogarth & Natalia Karelaia, 2004. "Ignoring information in binary choice with continuous variables: When is less 'more'?," Economics Working Papers 742, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2004.
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