Search and Satisficing
Andrew Caplin, Mark Dean, Daniel Martin
American Economic Review · 2011 · Volume 101 · Issue 7
Abstract
Many everyday decisions are made without full examination of all available options, and, as a result, the best available option may be missed. We develop a search-theoretic choice experiment to study the impact of incomplete consideration on the quality of choices. We find that many decisions can be understood using the satisficing model of Herbert Simon (1955): most subjects search sequentially, stopping when a "satisficing" level of reservation utility is realized. We find that reservation utilities and search order respond systematically to changes in the decision making environment. (JEL D03, D12, D83)
Keywords
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making, Consumer Economics: Empirical Analysis, Search, Learning, Information and Knowledge, Communication, Belief
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