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On Preference for Flexibility and Complexity Aversion: Experimental Evidence 1

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  • Doron Sonsino
  • Marvin Mandelbaum

Abstract

Desire for flexibility suggests that the value of a choice-menu should increase with the number of options included. Complexity-aversion on the other hand may imply that the value of a menu decreases with its cardinality. We present the results of an experiment where 5 groups of subjects were asked to evaluate saving plans that let the investor choose between alternative indexing-schemes before the saving period ends. The complexity of the different plans was manipulated in two ways: (1) increasing the number of indexing options; (2) reducing the quality of information upon which the choice between different indices is made. We show that an increase in the number of indexing-options produces a negative complexity effect when the quality of information is high. The same change however results in a positive flexibility effect when the quality of information is low. More generally our results suggest a `negative cross interaction of complexity effects' and that the impact of complexity is marginally decreasing. We discuss possible cognitive explanations to the observed evaluation-patterns. Copyright Kluwer Academic Publishers 2001

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  • Doron Sonsino & Marvin Mandelbaum, 2001. "On Preference for Flexibility and Complexity Aversion: Experimental Evidence 1," Theory and Decision, Springer, vol. 51(2), pages 197-216, December.
    • Handle: RePEc:kap:theord:v:51:y:2001:i:2:p:197-216
    DOI: 10.1023/A:1015555026870
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    2. B. Douglas Bernheim & Charles Sprenger, 2020. "On the Empirical Validity of Cumulative Prospect Theory: Experimental Evidence of Rank‐Independent Probability Weighting," Econometrica, Econometric Society, vol. 88(4), pages 1363-1409, July.
    3. Ritxar Arlegi & Sacha Bourgeois-Gironde & Mikel Hualde, 2021. "On the aversion to incomplete preferences," Theory and Decision, Springer, vol. 90(2), pages 183-217, March.
    4. Sabrina Hammiche & Laurent Denant-Boemont, 2008. "Que vaut la flexibilité des choix individuels de transport ? Une étude de cas expérimental," Économie et Prévision, Programme National Persée, vol. 182(1), pages 97-111.
    5. Gönül Doğan & Kenan Kalayci & Priscilla Man, 2024. "Pyramid Schemes," Discussion Papers Series 667, School of Economics, University of Queensland, Australia.
    6. Stefania Sitzia & Daniel Zizzo, 2011. "Does product complexity matter for competition in experimental retail markets?," Theory and Decision, Springer, vol. 70(1), pages 65-82, January.
    7. Stefania Sitzia & Daniel John Zizzo, 2008. "Does Product Complexity Matter for Competition in Experimental Markets?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2008-33, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    8. Eric Danan & Anthony Ziegelmeyer, 2006. "Are preferences complete? An experimental measurement of indecisiveness under risk," Papers on Strategic Interaction 2006-01, Max Planck Institute of Economics, Strategic Interaction Group.
    9. Arlegi, Ritxar & Bourgeois-Gironde, Sacha & Hualde, Mikel, 2022. "Attitudes toward choice with incomplete preferences: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 663-679.

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