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Age Effects and Heuristics in Decision Making

Author

Listed:
  • Tibor Besedeš

    (Georgia Institute of Technology)

  • Cary Deck

    (University of Arkansas and ESI, Chapman University)

  • Sudipta Sarangi

    (Louisiana State University and DIW Berlin)

  • Mikhael Shor

    (University of Connecticut)

Abstract

Using controlled experiments, we examine how individuals make choices when faced with multiple options. Choice tasks are designed to mimic the selection of health insurance, prescription drug, or retirement savings plans. In our experiment, available options can be objectively ranked, allowing us to examine optimal decision making. First, the probability of a person selecting the optimal option declines as the number of options increases, with the decline being more pronounced for older subjects. Second, heuristics differ by age, with older subjects relying more on suboptimal decision rules. In a heuristics validation experiment, older subjects make worse decisions than younger subjects. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Tibor Besedeš & Cary Deck & Sudipta Sarangi & Mikhael Shor, 2012. "Age Effects and Heuristics in Decision Making," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 580-595, May.
    • Handle: RePEc:tpr:restat:v:94:y:2012:i:2:p:580-595
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    More about this item

    Keywords

    experiments; decision making; optimal choice; age effects; heuristics;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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