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Complexity and Biases

Kenan Kalayci () and Marta Serra-Garcia

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: We examine experimentally how complexity affects decision-making, when individuals choose among different products with varying benefits and costs. We find that complexity in costs leads to choosing a high-benefit product, with high costs and overall lower payoffs. In contrast, when complexity is in the benefits of the product, we cannot reject the hypothesis of random mistakes. We also examine the role of heterogeneous complexity. We find that individuals still (mistakenly) choose the high-benefit but costly product, even if cheaper and simple products are available. Our results suggest that salience is a main driver of choices under different forms of complexity.

Keywords: Complexity; Credit; Mistakes; Narrow Bracketing (search for similar items in EconPapers)
JEL-codes: C91 D03 D14 G02 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-hme
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Journal Article: Complexity and biases (2016) Downloads
Journal Article: Complexity and biases (2016) Downloads
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