Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/49408
Authors: 
Besedes, Tibor
Deck, Carey
Sarangi, Sudipta
Shor, Mikhael
Year of Publication: 
2010
Series/Report no.: 
DIW Discussion Papers 1047
Abstract: 
Using controlled experiments, we examine how individuals make choices when faced with multiple options. Choice tasks are designed to mimic the selection of health insurance, prescription drug, or retirement savings plans. In our experiment, available options can be objectively ranked allowing us to examine optimal decision making. First, the probability of a person selecting the optimal option declines as the number of options increases, with the decline being more pronounced for older subjects. Second, heuristics differ by age with older subjects relying more on suboptimal decision rules. In a heuristics validation experiment, older subjects make worse decisions than younger subjects.
Subjects: 
Experiments
decision making
optimal choice
age effects
heuristics
JEL: 
C91
D03
I18
Document Type: 
Working Paper

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