Salient Cues and Complexity

72 Pages Posted: 12 Nov 2020 Last revised: 8 Feb 2022

See all articles by Markus Dertwinkel-Kalt

Markus Dertwinkel-Kalt

University of Münster

Mats Köster

Central European University (CEU)

Date Written: February 8, 2022

Abstract

Important decisions are often complex, and existing evidence suggests that complexity can affect economic choice. It is still an open question, however, exactly when and how it matters for behavior. We hypothesize that people use "salient cues" to solve complex problems, while absent such a cue they are easily overwhelmed by complexity. We experimentally test and support this hypothesis in the context of choice under risk.

Keywords: Salience, Complexity, Skewness, Portfolio Selection, (Naive) Diversification

JEL Classification: D81

Suggested Citation

Dertwinkel-Kalt, Markus and Köster, Mats, Salient Cues and Complexity (February 8, 2022). Available at SSRN: https://ssrn.com/abstract=3697313. or http://dx.doi.org/10.2139/ssrn.3697313

Markus Dertwinkel-Kalt

University of Münster ( email )

Universitätsstraße 14-16
Münster, 48143
Germany

Mats Köster (Contact Author)

Central European University (CEU) ( email )

Quellenstraße 51
Vienna
Austria

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