Behavioral patterns and reduction of sub-optimality: an experimental choice analysis

This paper attempts to identify behavioral patterns and compare their average success considering several criteria of bounded rationality. Experimentally observed choice behavior in various decision tasks is used to assess heterogeneity in how individual participants respond to 15 randomly ordered portfolio choices, each of which is experienced twice. Treatments differ in (not) granting probability information and in (not) eliciting aspirations. Since in our setting neither other regarding concerns nor risk attitude matter and probability of the binary chance move is (optimal) choice irrelevant, categorizing decision types relies on parameter dependence and choice adaptations. We find that most participants reduce systematically sub-optimality when following the identified criteria.     

No Switchbacks: Rethinking Aspiration-Based Dynamics in the Ultimatum Game

Aspiration-based evolutionary dynamics have recently been used to model the evolution of fair play in the ultimatum game showing that incredible threats to reject low offers persist in equilibrium. We focus on two extensions of this analysis: we experimentally test whether assumptions about agent motivations (aspiration levels) and the structure of the game (binary strategy space) reflect actual play, and we examine the problematic assumption embedded in the standard replicator dynamic that unhappy agents who switch strategies may return to a rejected strategy without exploring other options. We find that the resulting “no switchback” dynamic predicts the evolution of play better than the standard dynamic and that aspirations are a significant motivator for our participants. In the process, we also construct and analyze a variant of the ultimatum game in which players can adopt conditional (on their induced aspirations) strategies.     

On some suggestions for having non-binary social choice functions

The various paradoxes of social choice uncovered by Arrow [1], Sen [10] and others have led some writers to question the basic assumption of a binary social choice function underlying most of these paradoxes. Schwartz [8], for example, proves an important theorem which may be considered to be a generalization of the famous paradox of Arrow, and then lays the blame for this paradox on the assumption of a binary social choice function. He then proceeds to define a type of choice functions which, like binary choice functions, define the best elements in sets of more than two alternatives on the basis of binary comparisons, but which, as he claims, have an advantage over binary choice functions, in so far as they always ensure the existence of best elements for sets of more than two alternatives irrespective of the results of binary comparisons. The purpose of this paper is to show that even a considerable weakening of the assumption of a binary social choice function does not go very far towards solving some of the paradoxes under consideration, and that if replacing the requirement of a binary social choice function by a Schwartz type social choice function solves these paradoxes, it does so only by violating the universally acceptable value judgment that in choosing from a set of alternatives, society should never choose an alternative which is Pareto inoptimal in that set (i.e., the socially best alternatives in a set should always be Pareto optimal). This argument is substantiated with the help of an extended version of Sen's [10] paradox of a Paretian liberal, and thus a by-product of our analysis is a generalization of the theorem of Sen [10]. The argument itself, however, is more general and applies also to the impossibility result proved by Schwartz [8].We are extremely grateful to Amartya Sen for his helpful comments.

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Optimize,satisfice, or choose without deliberation? A simple minimax-regret assessment

Simon (Q J Econ 69:99–118, 1955) introduced satisficing, but he did not provide a precise definition or analysis. Other researchers have subsequently interpreted satisficing in various ways, but a consensus perspective still has not emerged. This paper interprets satisficing as a class of decision strategies that a person might use when seeking to optimize in a setting where deliberation is costly. Costly deliberation lies at the heart of Simon’s motivation of satisficing, but he did not formalize the idea. I do so here, studying decision making as a problem of minimax-regret planning in which costly deliberation enables a person to reduce ambiguity. I report simple specific findings on how the magnitude of deliberation costs may affect choice of a decision strategy.     

Boundedly rational expected utility theory

We build a satisficing model of choice under risk which embeds Expected Utility Theory (EUT) into a boundedly rational deliberation process. The decision maker accumulates evidence for and against alternative options by repeatedly sampling from her underlying set of EU preferences until the evidence favouring one option satisfies her desired level of confidence. Despite its EUT core, the model produces patterns of behaviour that violate standard EUT axioms, while at the same time capturing systematic relationships between choice probabilities, response times and confidence judgments, which are beyond the scope of theories that do not take deliberation into account.

     

The binary search decomposition in a decentralized organization

An analytic model of the resource allocation decision process in a decentralized organization is presented. The model follows the philosophy of Kornai and Liptak in its decomposition procedure but employs the binary search technique in its resource allocation process. Briefly, the model provides two important concepts relevant to the decision making process of a decentralized organization: (1) satisficing technique of coordination and (2) simulation of a resource allocation decision process.     

(Im)mobility: regional population structures in Aboriginal Australia

The socio‐cultural factors underlying contemporary Aboriginal settlement and mobility patterns are invisible to the categorisations that underpin both demographic modelling and policy that relies on that modelling. Taking the Yolngu people of north east Arnhem Land as a case study, this paper elaborates an anchored network model consisting of three tiers—an ontologically prior ancestral geography, with its associated contemporary settlements, to which kin‐based networks are anchored by nodal individuals. While the content of each tier may vary across the continent, this model can potentially be applied wherever Aboriginal Australians continue to live in kin‐based social universes. It is argued that constructing a ‘recognition space’ between conventional demographic categories and Aboriginal categorisations of their socio‐spatial universes would lead to more informed policy‐making on the part of government. Such policies would take account of the aspirations of Aboriginal people rather than imposing upon them the state's aspirations for them.     

Entitlement and the efficiency-equality trade-off: an experimental study

When randomly assigning participants to experimental roles and the according payment prospects, participants seem to receive “manna from heaven.” In our view, this seriously questions the validity of laboratory findings. We depart from this by auctioning off player roles via the incentive compatible random price mechanism thus avoiding the selection effect of competitive second price auctions. Our experiment employs the generosity game where the proposer chooses the size of the pie, facing an exogenously given own agreement payoff, and the responder is the residual claimant. We find that entitlement crowds out equality seeking and strengthens efficiency seeking. More generally, we find that inducing entitlement for the roles in which participants find themselves makes a difference. Interpreting participants’ willingness to pay for their role as their aspiration level further allows to test satisficing and explore “mutual satisficing.” We find that responder participants apparently do not anticipate proposer generosity in aspiration formation.     

What Makes a Good Decision? Robust Satisficing as a Normative Standard of Rational Decision Making

Most decisions in life involve ambiguity, where probabilities can not be meaningfully specified, as much as they involve probabilistic uncertainty. In such conditions, the aspiration to utility maximization may be self‐deceptive. We propose “robust satisficing” as an alternative to utility maximizing as the normative standard for rational decision making in such circumstances. Instead of seeking to maximize the expected value, or utility, of a decision outcome, robust satisficing aims to maximize the robustness to uncertainty of a satisfactory outcome. That is, robust satisficing asks, “what is a ‘good enough’ outcome,” and then seeks the option that will produce such an outcome under the widest set of circumstances. We explore the conditions under which robust satisficing is a more appropriate norm for decision making than utility maximizing.     

Do Immigrant Minority Parents Have More Consistent College Aspirations for Their Children?*

Objective. Educational aspirations are an important predictor of eventual attainment. We examine if immigrant parents have higher aspirations for their children compared to native‐born parents and whether they are more likely to maintain high aspirations over time. Methods. Using data from the Early Childhood Longitudinal Study‐Kindergarten Cohort (ECLS‐K), we document differences in the formation and maintenance of white, black, Hispanic, and Asian parents' college aspirations for their children between kindergarten, third, and fifth grades. We also examine the role of acculturation in the stability of immigrant parents' aspirations. Results. We find that immigrant parents are more optimistic about their children's educational trajectories than are native‐born parents and that over time they are more likely to maintain consistently high aspirations for their children. Conclusion. Immigrant parents do not see their children's future as downwardly mobile, and instead remain optimistic, consistently reinforcing messages about college plans throughout childhood.     

Modelling curiosity in decision-making

This paper develops a model of choice with an agent that is capable of experiencing curiosity using Loewenstein’s (Psychol Bull 116(1):75–98, 1994) information gap interpretation of curiosity. We then proceed to determine the restrictions on choice behaviour implied by the model in two choice environments: no discovery—where the Decision-Maker does not have the opportunity to learn—and discovery—where she is afforded such an opportunity. These restrictions can be applied by an observer to determine if a Decision-Maker’s choices align with the model.     

The Tyranny of Fit: Yet another Barrier to Mainstream Employment for Disabled People in Sheltered Employment

Policies that encourage the aspirations of disabled people for mainstream employment might be an effective way to increase their workforce participation rate. This study aims to determine which people in sheltered employment aspire to a job beyond their current sheltered employment job. We asked 64 people with sheltered employment jobs about their workplace and job fit, their intentions to stay in their current job and their future job aspirations. The key finding is that perceptions of fit indirectly and adversely affect aspirations via intention to stay. Participants who felt they fitted planned to keep working at their sheltered workplace, but a stronger intention to stay made it less likely that they could identify an alternative to sheltered employment. These results were not influenced by age or the time spent in sheltered employment. Policy should therefore support people in sheltered employment to develop realistic job aspirations. Helping disabled people to identify opportunities beyond sheltered employment can avoid complacency and free up sheltered job opportunities for other disabled people. But policy changes are required to leverage sheltered employment as a first step for disabled people to develop mainstream job aspirations and facilitate transitioning beyond sheltered employment job options.     

Alfred Schutz and Herbert Simon: Can their Action Theories Work Together?

This paper combines Alfred Shultz and Herbert Simon's theories of action in order to understand the grey area between dynamic and completely unstructured decision making better. As a result I have put together a specific scheme of how choice elements are represented from an agent's personal experience, so as to create a bridge between the phenomenological and cognitive‐procedural approaches of decision making. I first look at the key points of their original models relating Alfred Schutz's “provinces of meaning” and Herbert Simon's “satisficing” mechanism. I then consider the particular concept of intentionality and reasoning by analogy for different choice settings. Finally I have suggested a perspective based on creative behaviour and sense‐making for ill‐structured conditions.     

Managing staged policy implementation: Balancing short-term needs and long-term goals

This study focuses on the agency of governments engaged in implementation processes that take place over a number of years and through multiple stages. The long timeframes associated with staged implementation leave reforms vulnerable to the institutional effects that may ultimately derail policy aspirations. Governments engaged in staged implementation need to be able to plan longitudinally (foresight capacity) and analyse whether implementation processes are creating endogenous sources of institutional change and the likely impact of such change (reflective capacity). In this paper, we argue that being able to exercise foresight capacity and reflective capacity is necessary but not sufficient, if long-term policy goals are to be realised. Governments must also be able to navigate the inconsistent objectives that arise across the different stages of an implementation process by modifying implementation approaches in ways that reduce the likelihood of unwanted implementation effects occurring—what we have labelled “mitigation capacity.”     

The Elements of Rationality and Chance in the Choice of Human Action

The focus in this paper is on deliberate human action. The central questions addressed are: whether purely rational choice is possible; whether choices may be induced by chance alone; or whether there is always a mixture of rationality and chance, as well as other factors such as habit, emotion, imitation and irrationality. The approach is a factualist one, upholding the view that, although human action can be explained by its antecedents, this is not incompatible with the notion of "free choice". It is the actual choosing process that determines the final choice of action. Whatever the sources of the elements involved in the choosing process, the choice of action is a specific outcome created by the acting agent. It is in this choosing process and decision making that both rationality and chance enter. The conclusion is that rationality is the element which links intentionality with goal seeking and attainment, but that the actual choice is determined by a complex interactive process in which both logic and chance play a part.     

Dollar appreciation,deficit stimulation,and the new protectionism

This article probes whether contemporary U.S. protectionism arises from an appreciating dollar. It concludes that (a) an enrich-thy-neighbor policy of upvaluation has transformed the current U.S. economic recovery into an engine of global recovery; (b) flexible exchange rates continually equilibrate the balance of payments as evidenced in changed domestic—relative to foreign—prices, as well as in capital movements induced by interest-rate differentials resulting from exchange-rate shifts; and (c) flexible exchange rates automatically alter so as to maintain a country's competitive position in the world economy even when facing deficits at home and abroad.     

When learning meets salience

Behavior in one-shot coordination games with common knowledge labels can be described by theories of salience and focal points. Behavior in repeated games, including coordination games, can be explained by theories of learning. This paper considers games in which both theories apply, repeated coordination games with common knowledge labels. The research question asks how players combine the two sources of information—salience and the history of play—when making their choices. We specifically ask whether salience, normally considered as a one-shot strategy, continues to influence players’ actions beyond the first round, even while the player might learn from the history of play. We explore two possible mechanisms for such a continuing effect of salience: via an influence on prior beliefs, and/or via a bias, given beliefs. Regression analysis of individual-level choices shows that salience, normally considered only in the context of one-shot games, does exert a lasting effect, with the precise mechanism depending on the details of the game.     

A Note On Impossibility Theorems and Seniority Rules

We characterize seniority rules, also known as lexical dictatorships, under weak consistency constraints on the groups choice function. These constraints are base triple-acyclicity in the case of binary choices and rationalizability (although not rationality) in the case of choices between an arbitrary number of alternatives. Existing results on these weakened constraints remain silent on the treatment of the groups most junior individuals and therefore do not yield a complete characterization of seniority rules. We also impose a universal domain, binary strict Pareto optimality, binary Pareto indifference, binary independence of irrelevant alternatives, and the newly introduced condition of conflict resolution. The latter condition requires a social choice rules not to remain indecisive between alternatives for which individuals have conflicting preferences.JEL CLASSIFICATIONS: D63, D71This revised version was published online in May 2005 with a corrected article title.