(Sub) Optimality and (Non) Optimal Satisficing in Risky Decision Experiments

43 Pages Posted: 5 Oct 2016

See all articles by Daniela Di Cagno

Daniela Di Cagno

LUISS, Rome

Arianna Galliera

Catholic University of the Sacred Heart of Milan

Francesca Marzo

Luiss Guido Carli University

Werner Güth

Max Planck Institute for Research on Collective Goods; Luiss Guido Carli University

Noemi Pace

Ca Foscari University of Venice - Department of Economics

Date Written: August 24, 2016

Abstract

A risky choice experiment is based on one-dimensional choice variables and risk neutrality induced via binary lottery incentives. Each participant confronts many parameter constellations with varying optimal payoffs. We assess (sub)optimality, as well as (non)optimal satisficing, partly by eliciting aspirations in addition to choices. Treatments differ in the probability that a binary random event, which are payoff- but not optimal choice-relevant, is experimentally induced and whether participants choose portfolios directly or via satisficing, i.e., by forming aspirations and checking for satisficing before making their choice. By incentivizing aspiration formation, we can test satisficing, and in cases of satisficing, determine whether it is optimal.

Keywords: (Un)Bounded Rationality, Satisficing, Risk, Uncertainty, Experiments

JEL Classification: D03, D81, C91

Suggested Citation

Di Cagno, Daniela and Galliera, Arianna and Marzo, Francesca and Güth, Werner and Pace, Noemi, (Sub) Optimality and (Non) Optimal Satisficing in Risky Decision Experiments (August 24, 2016). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 22/WP/2016, Available at SSRN: https://ssrn.com/abstract=2847739

Daniela Di Cagno

LUISS, Rome ( email )

00162 Rome, Roma
Italy

HOME PAGE: http://www.luiss.it/facolta/insegnamenti/curriculu

Arianna Galliera

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Francesca Marzo

Luiss Guido Carli University ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

Werner Güth

Max Planck Institute for Research on Collective Goods

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Luiss Guido Carli University ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

Noemi Pace (Contact Author)

Ca Foscari University of Venice - Department of Economics ( email )

Cannaregio 873
Venice, 30121
Italy

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