Resource-Allocation Behavior under Certainty, Risk, and Uncertainty

Abstract

Decisions about the allocation of resources are common in everyday life, but little is known about resource-allocation behavior. Once the variables of certain resource-allocation decisions have been identified, the optimal solution can be calculated by linear programming. Subjects allocated resources under conditions of certainty, risk, and uncertainty. Results indicated that subjects can learn to perform a resource-allocation task with surprising success, that subjects perform best under certainty and worst under uncertainty, that subjects lend to allocate more resources early in a time period, and that subjects prefer to hold some resources in reserve in case of unanticipated needs.