Exploring Novel Representations versus Exploiting Familiar Search Rules: The Role of Cognitive Resources in Solving Novel Problems of Increasing Complexity

Posted: 6 Mar 2017 Last revised: 2 Mar 2020

See all articles by Martin Hohnisch

Martin Hohnisch

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management

Sabine Pittnauer

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management

Gwendolyn K. Lee

University of Florida - Warrington College of Business Administration

Andreas Pfingsten

University of Münster - Finance Center Münster

Reinhard Selten

University of Bonn - Economic Science Area; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 28, 2020

Abstract

Research on problem solving drawing on the Carnegie School suggests that if a problem is of elevated complexity an appropriate representation is key to tackling it. However, when an appropriate representation is not in the decision maker’s knowledge base, it is unclear what determines whether the decision maker searches for novel representations. We theorize that novel representations can be explored only if the search is cognitively affordable. Yet, as problem complexity increases, the search becomes less cognitively affordable. High complexity obstructs the exploration of novel representations and prompts the exploitation of familiar search rules that requires less cognitive resources. Familiar search rules, however, are typically inappropriate for solving a novel problem when complexity is high. We designed and conducted an experiment to test our theory. Participants tackled a multi-period financial decision problem in an environment featuring rare but potentially payoff-devastating random shocks. Our findings corroborate that, as problem complexity increased, fewer participants explored novel representations and more participants exploited familiar search rules. The participants who explored novel representations performed better than those who used familiar search rules. The challenge of problem complexity therefore highlights the exploration of novel representations as an important direction for the research on search processes.

Keywords: Exploration, Representation, Heuristic, Decision Making, Uncertainty, Problem Solving, Procedural Rationality

Suggested Citation

Hohnisch, Martin and Pittnauer, Sabine and Lee, Gwendolyn K. and Pfingsten, Andreas and Selten, Reinhard, Exploring Novel Representations versus Exploiting Familiar Search Rules: The Role of Cognitive Resources in Solving Novel Problems of Increasing Complexity (February 28, 2020). Available at SSRN: https://ssrn.com/abstract=2927681 or http://dx.doi.org/10.2139/ssrn.2927681

Martin Hohnisch

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management ( email )

Haifa 32000
Israel

Sabine Pittnauer (Contact Author)

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management ( email )

Haifa 32000
Israel

Gwendolyn K. Lee

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=2519

Andreas Pfingsten

University of Münster - Finance Center Münster ( email )

Universitätsstr. 14-16
Muenster, D-48143
Germany

Reinhard Selten

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
++49-228 73-9190 (Phone)
++49-228 73-9193 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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