Complexity and Procedural Choice
American Economic Journal: Microeconomics
vol. 15,
no. 2, May 2023
(pp. 384-413)
Abstract
We test the core ideas of the "automata" approach to bounded rationality, using simple experimental bandit tasks. Optimality requires subjects to use a moderately complex decision procedure, but most subjects in our baseline condition instead use simpler (often sub-optimal) procedures that economize on "states" in the algorithmic structure of the rule. When we artificially remove the mental costs of tracking states by having the computer track and organize past events, subjects abandon these simpler rules and use maximally complex optimal rules instead. The results thus suggest that the main type of complexity described in the automata literature fundamentally influences behavior.Citation
Banovetz, James, and Ryan Oprea. 2023. "Complexity and Procedural Choice." American Economic Journal: Microeconomics, 15 (2): 384-413. DOI: 10.1257/mic.20210032Additional Materials
JEL Classification
- C91 Design of Experiments: Laboratory, Individual
- D12 Consumer Economics: Empirical Analysis
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
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