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Cumulative Dominance and Heuristic Performance in Binary Multi - Attribute Choice

Author

Listed:
  • Baucells Alibés Manel

    () (UNIVERSITY OF NAVARRA)

  • Carrasco López Juan Antonio

    () (UNIVERSITY OF NAVARRA POLYTECHNIC UNIVERSITY OF CATALONIA POMPEU FABRA UNIVERSITY)

Abstract

Several studies have reported high performance of simple decision heuristics in multi-attribute decision making. In this working paper, we focus on situations where attributes are binary and analyze the performance of Deterministic-Elimination-By-Aspects (DEBA) and similar decision heuristics. We considernon-increasing weights and two probabilistic models for the attribute values: one where attribute values are independent Bernoulli random variables; the other one where they are binary random variables with inter-attribute positive correlations. Using these models, we show that good performance of DEBA is explained by the presence of cumulative as opposed to simple dominance. Wether efore introduce the concepts of cumulative dominance compliance and fully cumulative dominance compliance and show that DEBA satisfies those properties. We derive a lower bound with which cumulative dominance compliant heuristics will choose a best alternative and show that, even with many attributes, this is not small. We also derive an upper bound for the expected loss of fully cumulative compliance heuristics and show that this is moderate even when the number of attributes is large. Both bounds are independent of the values of the weights.

Suggested Citation

  • Baucells Alibés Manel & Carrasco López Juan Antonio, 2006. "Cumulative Dominance and Heuristic Performance in Binary Multi - Attribute Choice," Working Papers 201047, Fundacion BBVA / BBVA Foundation.
  • Handle: RePEc:fbb:wpaper:201047
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    Cited by:

    1. Berg, Nathan & Biele, Guido & Gigerenzer, Gerd, 2010. "Does consistency predict accuracy of beliefs?: Economists surveyed about PSA," MPRA Paper 26590, University Library of Munich, Germany.
    2. Konstantinos Katsikopoulos & Gerd Gigerenzer, 2008. "One-reason decision-making: Modeling violations of expected utility theory," Journal of Risk and Uncertainty, Springer, vol. 37(1), pages 35-56, August.
    3. Soyer, Emre & Hogarth, Robin M., 2015. "The golden rule of forecasting: Objections, refinements, and enhancements," Journal of Business Research, Elsevier, vol. 68(8), pages 1702-1704.
    4. Berg, Nathan, 2014. "Success from satisficing and imitation: Entrepreneurs' location choice and implications of heuristics for local economic development," Journal of Business Research, Elsevier, vol. 67(8), pages 1700-1709.
    5. Robin M. Hogarth & Natalia Karelaia, 2005. "Simple Models for Multiattribute Choice with Many Alternatives: When It Does and Does Not Pay to Face Trade-offs with Binary Attributes," Management Science, INFORMS, vol. 51(12), pages 1860-1872, December.
    6. Robin Hogarth & Natalia Karelaia, 2005. "Regions of rationality: Maps for bounded agents," Economics Working Papers 828, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2006.
    7. Robin Hogarth & Natalia Karelaia, 2005. "Regions of Rationality: Maps for bounded agents," Working Papers 269, Barcelona Graduate School of Economics.
    8. Robin Hogarth & Natalia Karelaia, 2006. "On heuristic and linear models of judgment: Mapping the demand for knowledge," Economics Working Papers 974, Department of Economics and Business, Universitat Pompeu Fabra.
    9. Konstantinos V. Katsikopoulos, 2009. "Coherence and correspondence in engineering design: informing the conversation and connecting with judgment and decision-making research," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(2), pages 147-153, March.
    10. Clintin Davis-Stober, 2011. "A Geometric Analysis of When Fixed Weighting Schemes Will Outperform Ordinary Least Squares," Psychometrika, Springer;The Psychometric Society, vol. 76(4), pages 650-669, October.

    More about this item

    Keywords

    Multi-attribute decision making; binary attributes; DEBA; cumulative dominance; performance bounds.;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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