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Task Transcending Satisficing - An Experimental Study

  • Werner Güth

    ()

  • Gerlinde Fellner
  • Ev Martin

    ()

The paper explores the applicability of bounded rationality theory. In particular, we investigate whether basic principles of aspiration formation and satisficing behavior are transferable between similar situations. Individuals are sequentially confronted with two risky investment tasks, a simple and a more complex one. Initially elicited state-contingent aspirations can be used to predict actual portfolio selection in both tasks. We explore whether individual characteristics of satisficing apply to both scenarios. Results indicate that stated aspirations frequently cannot be fulfilled. However, aspiration formation itself is highly transferable between tasks.

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File URL: ftp://papers.econ.mpg.de/esi/discussionpapers/2006-09.pdf
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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2006-09.

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Length: 30 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:esi:discus:2006-09
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  1. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  2. Brown, Stewart L., 1996. "Churning: Excessive trading in retail securities accounts," Financial Services Review, Elsevier, vol. 5(1), pages 43-56.
  3. Selten, Reinhard, . "Features of Experimentally Observed Bounded Rationality," Discussion Paper Serie B 421, University of Bonn, Germany, revised Nov 1997.
  4. Gerlinde Fellner & Werner Güth & Boris Maciejovsky, 2005. "Satisficing in Financial Decision Making A Theoretical and Experimental Attempt to Explore Bounded Rationality," Papers on Strategic Interaction 2005-23, Max Planck Institute of Economics, Strategic Interaction Group.
  5. Guth, Werner & Krahnen, Jan P. & Rieck, Christian, 1997. "Financial markets with asymmetric information: A pilot study focusing on insider advantages," Journal of Economic Psychology, Elsevier, vol. 18(2-3), pages 235-257, April.
  6. Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
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