The Allocation of Time in Decision-Making
We study the allocation of time across decision problems. If a decision-maker (1) has noisy estimates of value, (2) improves those estimates the longer she analyzes a choice problem, and (3) allocates time optimally, then the decision-maker should spend less time choosing when the value gap between two options is relatively large. To test this prediction we asked subjects to make 27 binary incentive-compatible intertemporal choices, and measure response time for each decision. Our time allocation model explains 54% of the variance in average decision time. These results support the view that decision-making is a cognitively costly activity that uses time as an input allocated according to cost-benefit principles. (JEL: C0, D01, D03, D87, D9) (c) 2009 by the European Economic Association.
Volume (Year): 7 (2009)
Issue (Month): 2-3 (04-05)
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- Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2006. "Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model," American Economic Review, American Economic Association, vol. 96(4), pages 1043-1068, September.
- Christopher F. Chabris & David Laibson & Carrie L. Morris & Jonathon P. Schuldt & Dmitry Taubinsky, 2008. "Measuring intertemporal preferences using response times," NBER Working Papers 14353, National Bureau of Economic Research, Inc.
- Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2005. "Information Acquisition: Experimental Analysis of a Boundedly Rational Model," Levine's Bibliography 666156000000000480, UCLA Department of Economics.
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