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Age Effects and Heuristics in Decision Making
Tibor Besedes Georgia Institute of Technology Cary A. Deck University of Arkansas at Fayetteville - Department of Economics Sudipta Sarangi Louisiana State University, Baton Rouge - Department of Economics Mikhael Shor Vanderbilt University - Owen Graduate School of Management January 25, 2009 Abstract: We examine in controlled experiments how individuals make choices when faced with multiple options. The choice tasks mimic the selection of health insurance, prescription drug, or retirement savings plans. However, in our experiment, the available options can be objectively ranked. We find that the probability of a person selecting the optimal option declines as the number of options increases, with the decline more pronounced for older subjects. Heuristics seem to differ by age with older subjects relying more on suboptimal decision rules. Behavior consistent with the estimated decision rules is observed in an out-of-sample experiment.
Keywords: experiments, decision making, optimal choice, age effects, heuristics JEL Classifications: C91, DO3, I18 Working Paper SeriesDate posted: January 26, 2009 ; Last revised: March 08, 2009Suggested CitationContact Information
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