Multiple Switching and Data Quality in the Multiple Price List

Chi Wai Yu, Y. Jane Zhang and Sharon Xuejing Zuo
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Chi Wai Yu: Hong Kong University of Science and Technology
Sharon Xuejing Zuo: School of Economics, Fudan University, and Shanghai Institute of International Finance and Economics

The Review of Economics and Statistics, 2021, vol. 103, issue 1, 136-150

Abstract: A substantial proportion of individuals who complete the widely used multiple price list (MPL) instrument switch back and forth between the safe and the risky choice columns, behavior that is believed to indicate low-quality decision making. We develop a conceptual framework to formally define decision-making quality, test explanations for the nature of low-quality decision making, and introduce a novel “nudge” treatment that reduced multiple switching behavior and increased decision-making quality. We find evidence in support of task-specific miscomprehension of the MPL and that non-multiple switchers and relatively high-cognitive-ability individuals are not immune to low-quality decision making.

Date: 2021
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