Cumulative dominance and heuristic performance in binary multi-attribute choice
AbstractSeveral studies have reported high performance of simple decision heuristics multi-attribute decision making. In this paper, we focus on situations where attributes are binary and analyze the performance of Deterministic-Elimination-By-Aspects (DEBA) and similar decision heuristics. We consider non-increasing weights and two probabilistic models for the attribute values: one where attribute values are independent Bernoulli randomvariables; the other one where they are binary random variables with inter-attribute positive correlations. Using these models, we show that good performance of DEBA is explained by the presence of cumulative as opposed to simple dominance. We therefore introduce the concepts of cumulative dominance compliance and fully cumulative dominance compliance and show that DEBA satisfies those properties. We derive a lower bound with which cumulative dominance compliant heuristics will choose a best alternative and show that, even with many attributes, this is not small. We also derive an upper bound for the expected loss of fully cumulative compliance heuristics and show that this is moderate even when the number of attributes is large. Both bounds are independent of the values of the weights.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 895.
Date of creation: Sep 2005
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Multi-attribute decision making; binary attributes; DEBA; cumulative dominance; performance bounds; Leex;
Other versions of this item:
- Baucells Alibés Manel & Carrasco López Juan Antonio, 2006. "Cumulative Dominance and Heuristic Performance in Binary Multi - Attribute Choice," Working Papers 201047, Fundacion BBVA / BBVA Foundation.
- 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-2005-10-15 (All new papers)
- NEP-DCM-2005-10-15 (Discrete Choice Models)
- NEP-MIC-2005-10-15 (Microeconomics)
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