Complexity and Procedural Choice

James Banovetz and Ryan Oprea

American Economic Journal: Microeconomics, 2023, vol. 15, issue 2, 384-413

Abstract: We test the core ideas of the "automata" approach to bounded rationality, using simple experimental bandit tasks. Optimality requires subjects to use a moderately complex decision procedure, but most subjects in our baseline condition instead use simpler (often sub-optimal) procedures that economize on "states" in the algorithmic structure of the rule. When we artificially remove the mental costs of tracking states by having the computer track and organize past events, subjects abandon these simpler rules and use maximally complex optimal rules instead. The results thus suggest that the main type of complexity described in the automata literature fundamentally influences behavior.

JEL-codes: C91 D12 D91 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mic.20210032 (application/pdf)
https://doi.org/10.3886/E172904V1 (text/html)
https://www.aeaweb.org/doi/10.1257/mic.20210032.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/mic.20210032.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmic:v:15:y:2023:i:2:p:384-413

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mic.20210032

Access Statistics for this article

American Economic Journal: Microeconomics is currently edited by Johannes Hörner

More articles in American Economic Journal: Microeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().