IDEAS home Printed from https://ideas.repec.org/p/ven/wpaper/201622.html
   My bibliography  Save this paper

(Sub) Optimality and (Non) Optimal Satisficing in Risky Decision Experiments

Author

Listed:
  • Daniela Di Cagno

    () (LUISS, Rome)

  • Werner Gürth

    () (LUISS, Rome; Max Planck Institute for Research on Collective Goods, Bonn)

  • Noemi Pace

    () (Department of Economics, University Of Venice Cà Foscari, Italy)

  • Arianna Galliera

    (LUISS, Rome)

  • Francesca Marzo

    (LUISS, Rome)

Abstract

A risky choice experiment is based on one-dimensional choice variables and risk neutrality induced via binary lottery incentives. Each participant confronts many parameter constellations with varying optimal payoffs. We assess (sub)optimality, as well as (non)optimal satisficing, partly by eliciting aspirations in addition to choices. Treatments differ in the probability that a binary random event, which are payoff- but not optimal choice–relevant, is experimentally induced and whether participants choose portfolios directly or via satisficing, i.e., by forming aspirations and checking for satisficing before making their choice. By incentivizing aspiration formation, we can test satisficing, and in cases of satisficing, determine whether it is optimal.

Suggested Citation

  • Daniela Di Cagno & Werner Gürth & Noemi Pace & Arianna Galliera & Francesca Marzo, 2016. "(Sub) Optimality and (Non) Optimal Satisficing in Risky Decision Experiments," Working Papers 2016:22, Department of Economics, University of Venice "Ca' Foscari".
  • Handle: RePEc:ven:wpaper:2016:22
    as

    Download full text from publisher

    File URL: http://www.unive.it/pag/fileadmin/user_upload/dipartimenti/economia/doc/Pubblicazioni_scientifiche/working_papers/2016/WP_DSE_dicagno_etal_22_16.pdf
    File Function: First version, anno
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Reinhard Selten & Abdolkarim Sadrieh & Klaus Abbink, 1999. "Money Does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse," Theory and Decision, Springer, vol. 46(3), pages 213-252, June.
    2. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November.
    3. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
    4. Gilboa,Itzhak & Schmeidler,David, 2001. "A Theory of Case-Based Decisions," Cambridge Books, Cambridge University Press, number 9780521802345, April.
    5. Martin Weber & Werner G³th & Eric van Damme, 2005. "Risk Aversion on Probabilities: Experimental Evidence of Deciding Between Lotteries," Homo Oeconomicus, Institute of SocioEconomics, vol. 22, pages 192-209.
    6. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    7. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, vol. 62(6), pages 1251-1289, November.
    8. Hey, John D., 1995. "Experimental investigations of errors in decision making under risk," European Economic Review, Elsevier, vol. 39(3-4), pages 633-640, April.
    9. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    10. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 69(1), pages 99-118.
    11. David H. Krantz & Howard C. Kunreuther, 2007. "Goals and plans in decision making," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 137-168, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    (un)Bounded Rationality; Satisficing; Risk; Uncertainty; Experiments;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ven:wpaper:2016:22. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Geraldine Ludbrook). General contact details of provider: http://edirc.repec.org/data/dsvenit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.