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What Makes a Rule Complex?

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  • Ryan Oprea

Abstract

We study the complexity of rules by paying experimental subjects to implement a series of algorithms and then eliciting their willingness-to-pay to avoid implementing them again in the future. The design allows us to examine hypotheses from the theoretical "automata" literature about the characteristics of rules that generate complexity costs. We find substantial aversion to complexity and a number of regularities in the characteristics of rules that make them complex and costly for subjects. Experience with a rule, the way a rule is represented, and the context in which a rule is implemented (mentally versus physically) also influence complexity.

Suggested Citation

  • Ryan Oprea, 2020. "What Makes a Rule Complex?," American Economic Review, American Economic Association, vol. 110(12), pages 3913-3951, December.
    • Handle: RePEc:aea:aecrev:v:110:y:2020:i:12:p:3913-51
    DOI: 10.1257/aer.20191717
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    Cited by:

    1. Jean-Paul Chavas & Eleonora Matteazzi & Martina Menon & Federico Perali, 2021. "Bargaining in the Family," CHILD Working Papers Series 88 JEL Classification: D1, Centre for Household, Income, Labour and Demographic Economics (CHILD) - CCA.
    2. Johannes Abeler & David Huffman & Collin Raymond & David B. Huffman, 2023. "Incentive Complexity, Bounded Rationality and Effort Provision," CESifo Working Paper Series 10541, CESifo.
    3. Benjamin Davies, 2022. "Why do experts give simple advice?," Papers 2209.11710, arXiv.org.
    4. Brad M. Barber & Xing Huang & Terrance Odean & Christopher Schwarz, 2022. "Attention‐Induced Trading and Returns: Evidence from Robinhood Users," Journal of Finance, American Finance Association, vol. 77(6), pages 3141-3190, December.
    5. Gian Caspari & Manshu Khanna, 2021. "Non-Standard Choice in Matching Markets," Papers 2111.06815, arXiv.org.
    6. Anufriev, Mikhail & Duffy, John & Panchenko, Valentyn, 2022. "Learning in two-dimensional beauty contest games: Theory and experimental evidence," Journal of Economic Theory, Elsevier, vol. 201(C).
    7. Jean-Paul Chavas & Eleonora Matteazzi & Martina Menon & Federico Perali, 2022. "(In)Efficient Bargaining in the Family," Working Papers 2, SITES.
    8. Evan M. Calford & Timothy N. Cason, 2021. "Contingent Reasoning and Dynamic Public Goods Provision," ANU Working Papers in Economics and Econometrics 2021-679, Australian National University, College of Business and Economics, School of Economics.
    9. Cavalli, F. & Chen, H.-J. & Li, M.-C. & Naimzada, A. & Pecora, N., 2023. "Heterogeneous expectations and equilibria selection in an evolutionary overlapping generations model," Journal of Mathematical Economics, Elsevier, vol. 104(C).
    10. Yuval Salant & Jörg L. Spenkuch, 2021. "Complexity and Choice," CESifo Working Paper Series 9239, CESifo.
    11. Abeler, Johannes & Huffman, David B. & Raymond, Collin, 2023. "Incentive Complexity, Bounded Rationality and Effort Provision," IZA Discussion Papers 16284, Institute of Labor Economics (IZA).
    12. Brice Corgnet & Roberto Hernán González, 2023. "On The Appeal Of Complexity," Working Papers 2312, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    13. Yoram Halevy & Guy Mayraz, 2020. "Identifying Rule-Based Rationality," Working Papers tecipa-677, University of Toronto, Department of Economics.
    14. Charness, Gary & Gneezy, Uri & Rasocha, Vlastimil, 2021. "Experimental methods: Eliciting beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 234-256.
    15. Marek Pycia & M. Utku Ünver, 2022. "Outside options in neutral allocation of discrete resources," Review of Economic Design, Springer;Society for Economic Design, vol. 26(4), pages 581-604, December.
    16. Pretnar, Nick & Olivola, Christopher Y. & Montgomery, Alan, 2021. "Two-stage Budgeting with Bounded Rationality," MPRA Paper 105356, University Library of Munich, Germany.
    17. Benson Tsz Kin Leung, 2020. "Learning in a Small/Big World," Papers 2009.11917, arXiv.org, revised Mar 2023.
    18. Araujo, Felipe A. & Piermont, Evan, 2023. "Unawareness and risk taking: The role of context," Journal of Economic Behavior & Organization, Elsevier, vol. 208(C), pages 61-79.
    19. Eguia, Jon & Hu, Tai-Wei, 2022. "Voter Polarization and Extremism," Working Papers 2022-5, Michigan State University, Department of Economics.
    20. Chatterjee, Kalyan & Hu, Tai-Wei, 2023. "Learning with limited memory: Bayesianism vs heuristics," Journal of Economic Theory, Elsevier, vol. 209(C).

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • 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
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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