Age Effects and Heuristics in Decision Making

41 Pages Posted: 21 Sep 2010 Last revised: 17 Apr 2013

See all articles by Tibor Besedes

Tibor Besedes

Georgia Institute of Technology

Cary A. Deck

University of Alabama - Department of Economics, Finance and Legal Studies

Sudipta Sarangi

Virginia Polytechnic Institute & State University

Mikhael Shor

University of Connecticut Department of Economics

Date Written: August 1, 2010

Abstract

Using controlled experiments, we examine how individuals make choices when faced with multiple options. Choice tasks are designed to mimic the selection of health insurance, prescription drug, or retirement savings plans. In our experiment, available options can be objectively ranked allowing us to examine optimal decision making. First, the probability of a person selecting the optimal option declines as the number of options increases, with the decline being more pronounced for older subjects. Second, heuristics differ by age with older subjects relying more on suboptimal decision rules. In a heuristics validation experiment, older subjects make worse decisions than younger subjects.

Keywords: experiments, decision making, optimal choice, age effects, heuristics

JEL Classification: C91, D03, I18

Suggested Citation

Besedes, Tibor and Deck, Cary A. and Sarangi, Sudipta and Shor, Mikhael, Age Effects and Heuristics in Decision Making (August 1, 2010). Review of Economics and Statistics, Vol. 94, No. 2, 2012, DIW Berlin Discussion Paper No. 1047, Available at SSRN: https://ssrn.com/abstract=1679740 or http://dx.doi.org/10.2139/ssrn.1679740

Tibor Besedes (Contact Author)

Georgia Institute of Technology ( email )

221 Bobby Dodd Way
Atlanta, GA 30332-0615
United States

Cary A. Deck

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Sudipta Sarangi

Virginia Polytechnic Institute & State University ( email )

250 Drillfield Drive
Blacksburg, VA 24061
United States

Mikhael Shor

University of Connecticut Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

HOME PAGE: http://www.mikeshor.com/

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