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Stochastic Choice and Optimal Sequential Sampling

40 Pages Posted: 6 May 2015 Last revised: 22 Mar 2017

Drew Fudenberg

Massachusetts Institute of Technology (MIT)

Philipp Strack

University of California, Berkeley - Department of Economics

Tomasz Strzalecki

Harvard University - Harvard Institute of Economic Research

Date Written: March 20, 2017

Abstract

We model the joint distribution of choice probabilities and decision times in binary decisions as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant cost per unit time for gathering information. We show that choices are more likely to be correct when the agent chooses to decide quickly provided that the agent’s prior beliefs are correct. This better matches the observed correlation between decision time and choice probability than does the classical drift-diffusion model (DDM), where the agent knows the utility difference between the choices.

JEL Classification: C44, D83

Suggested Citation

Fudenberg , Drew and Strack, Philipp and Strzalecki, Tomasz, Stochastic Choice and Optimal Sequential Sampling (March 20, 2017). Available at SSRN: https://ssrn.com/abstract=2602927 or http://dx.doi.org/10.2139/ssrn.2602927

Drew Fudenberg

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Philipp Strack (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://philippstrack.com

Tomasz Strzalecki

Harvard University - Harvard Institute of Economic Research ( email )

Department of Economics
200 Littauer Center
Cambridge, MA 02138
United States

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