Regions of rationality: Maps for bounded agents

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Decision Analysis, 3(3), 124-144, 2006
To cite or link this document: Hogarth, Robin Karelaia, Natalia
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa 2005-04-01
dc.identifier.citation Decision Analysis, 3(3), 124-144, 2006
dc.description.abstract An important problem in descriptive and prescriptive research in decision making is to identify “regions of rationality,” i.e., the areas for which heuristics are and are not effective. To map the contours of such regions, we derive probabilities that heuristics identify the best of m alternatives (m > 2) characterized by k attributes or cues (k > 1). The heuristics include a single variable (lexicographic), variations of elimination-by-aspects, equal weighting, hybrids of the preceding, and models exploiting dominance. We use twenty simulated and four empirical datasets for illustration. We further provide an overview by regressing heuristic performance on factors characterizing environments. Overall, “sensible” heuristics generally yield similar choices in many environments. However, selection of the appropriate heuristic can be important in some regions (e.g., if there is low inter-correlation among attributes/cues). Since our work assumes a “hit or miss” decision criterion, we conclude by outlining extensions for exploring the effects of different loss functions.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 828
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.title Regions of rationality: Maps for bounded agents
dc.type info:eu-repo/semantics/workingPaper 2014-06-03T07:14:13Z
dc.subject.keyword Behavioral and Experimental Economics
dc.subject.keyword decision making
dc.subject.keyword bounded rationality
dc.subject.keyword lexicographic rules
dc.subject.keyword choice theory
dc.subject.keyword leex
dc.rights.accessRights info:eu-repo/semantics/openAccess

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