Are More Alternatives Better for Decision-Makers? A Note on the Role of Decision Cost

Huei-chung Lu, Mingshen Chen and Juin-jen Chang

Theory and Decision, 2005, vol. 58, issue 3, 283-304

Abstract: While the traditional economic wisdom believes that an individual will become better off by being given a larger opportunity set to choose from, in this paper we question this belief and build a formal theoretical model that introduces decision costs into the rational decision process. We show, under some reasonable conditions, that a larger feasible set may actually lower an individual’s level of satisfaction. This provides a solid economic underpinning for the Simon prediction. Copyright Springer 2005

Keywords: bounded rationality; considered subset; decision cost; D11; D83 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:kap:theord:v:58:y:2005:i:3:p:283-304

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DOI: 10.1007/s11238-005-5063-1

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