On Preference for Flexibility and Complexity Aversion: Experimental Evidence 1

Doron Sonsino () and Marvin Mandelbaum

Theory and Decision, 2001, vol. 51, issue 2, 197-216

Abstract: Desire for flexibility suggests that the value of a choice-menu should increase with the number of options included. Complexity-aversion on the other hand may imply that the value of a menu decreases with its cardinality. We present the results of an experiment where 5 groups of subjects were asked to evaluate saving plans that let the investor choose between alternative indexing-schemes before the saving period ends. The complexity of the different plans was manipulated in two ways: (1) increasing the number of indexing options; (2) reducing the quality of information upon which the choice between different indices is made. We show that an increase in the number of indexing-options produces a negative complexity effect when the quality of information is high. The same change however results in a positive flexibility effect when the quality of information is low. More generally our results suggest a `negative cross interaction of complexity effects' and that the impact of complexity is marginally decreasing. We discuss possible cognitive explanations to the observed evaluation-patterns. Copyright Kluwer Academic Publishers 2001

Keywords: Rationality; Menu-dependence; Information; Flexibility; Complexity (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (11)

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DOI: 10.1023/A:1015555026870

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