The relationship between risk attitudes and heuristics in search tasks: a laboratory experiment

Daniel Schunk and Joachim Winter (winter@lmu.de)

No 04-23, Papers from Sonderforschungsbreich 504

Abstract: The existing evidence from laboratory experiments suggests that relatively simple heuristics describe observed search behavior better than the optimal stopping rule derived under risk neutrality. Such behavior could be generated by two entirely different classes of decision rules: (i) rules that are optimal conditional on utility functions that depart from risk neutrality or (ii) heuristics that derive from limited cognitive processing capacities and satisfycing. In this paper, we develop and test search models that depart from the standard assumption of risk neutrality in order to distinguish these two possibilities. In our experiment, we present subjects not only with a standard search task, but also with a series of lottery tasks that serve to elicit the shape of their utility functions. We do not find a relationship between behavior in the search task and measures of risk aversion. Our data suggest, however, that loss aversion is important for explaining search behavior.

Keywords: search; heuristics; utility function elicitation; risk attitudes; prospect theory (search for similar items in EconPapers)
JEL-codes: C91 D83 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The relationship between risk attitudes and heuristics in search tasks: A laboratory experiment (2009)
Working Paper: The relationship between risk attitudes and heuristics in search tasks: A laboratory experiment (2009)
Working Paper: The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment (2007)
Working Paper: The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment (2005)
Working Paper: The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment (2004)
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