How Do People Choose? An Experimental Investigation of Models of ‘Sub-optimal’ Decision Making.

This research experimentally tests some recent theories of ‘sub-optimal’ behaviour in individual decision making. The first chapter experimentally tests a theory by Manski (2017), addressed to explaining ‘satisficing’ behaviour. He addresses two key questions: when should the decision-maker (DM) satisfice?; and how should the DM satisfice? The theoretical results are simple and intuitive; we have tested them experimentally. Our results show that some of his propositions (those relating to the ‘how’) appear to be empirically valid while others (those relating to the ‘when’) are less so. The second chapter tests two ‘limited attention’ theories, namely, those of Masatlioglu et al (2012), and Lleras et al (2017). These theories are built upon axioms which are weakenings of WARP and are experimentally testable using standard choice data. We found that one weakening is a more plausible weakening of WARP than the other. The third chapter involves the concept of salience. Leland and Schneider (2016) proposes axioms of salience perception. We experimentally test these. We also test the implications of these axioms for risky choice as encapsulated in their SWUP model. The results show general support for the axioms; while those from the implication section show some support for the CARA SWUP model, in that, for the majority of the subjects, SWUP fitted better than EU.