When and how to satisfice: an experimental investigation

John Denis Hey, Yudistira Hendra Permana, Nuttaporn Rochanahastin

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Abstract

This paper is about satisficing behaviour. Rather tautologically, this is when decision-makers are satisfied with achieving some objective, rather than in obtaining the best outcome. The term was coined by Herbert Simon in 1955, and has stimulated many discussions and theories. Prominent amongst these theories are models of incomplete preferences, models of behaviour under ambiguity, theories of rational inattention, and search theories. Most of these, however, seem to lack an answer to at least one of two key questions: when should the decision-maker (DM) satisfice; and how should the DM satisfice. In a sense, search models answer the latter question (in that the theory tells the DM when to stop searching), but not the former; moreover, usually the question as to whether any search at all is justified is left to a footnote. A recent paper by Manski (2017) fills the gaps in the literature and answers the questions: when and how to satisfice? He achieves this by setting the decision problem in an ambiguous situation (so that probabilities do not exist, and many preference functionals can therefore not be applied) and by using the Minimax Regret criterion as the preference functional. The results are simple and intuitive. This paper reports on an experimental test of his theory. The results show that some of his propositions (those relating to the ‘how’) appear to be empirically valid while others (those relating to the ‘when’) are less so.
Original languageEnglish
Pages (from-to)337-353
Number of pages17
JournalTHEORY AND DECISION
Volume83
Issue number3
Early online date27 Apr 2017
DOIs
Publication statusPublished - Oct 2017

Bibliographical note

© The Author(s) 2017.

Keywords

  • Cost of Deliberation
  • Experiments
  • Herbert Simon
  • No Deliberation
  • Optimising
  • Satisficing

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