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Choice Under Uncertainty: Violations of Optimality in Decision Making

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dc.contributor.advisor Hoy, Michael
dc.contributor.advisor Cadsby, Bram
dc.contributor.author Rodenburg, Kathleen
dc.date.accessioned 2013-06-11T17:55:31Z
dc.date.available 2013-06-11T17:55:31Z
dc.date.copyright 2013-06
dc.date.created 2013-06-05
dc.date.issued 2013-06-11
dc.identifier.uri http://hdl.handle.net/10214/7245
dc.description.abstract This thesis is an investigation of how subjects behave in an individual binary choice decision task with the option to purchase or observe for free additional information before reaching a decision. In part 1 of this thesis, an investigative study is conducted with the intent to sharpen the view to literature concerning corresponding psychology and economics experiments designed to test decision tasks that involve purchasing and observing information from an imperfect message prior to taking a terminal action choice. This investigative study identifies areas of research that warrant further investigation as well as provides enhancements for execution in the subsequent experiment conducted in Part 2 & 3 of this thesis. In Part 2 & 3, I conduct an experiment to test how subjects behave in an individual binary choice decision task with the option to purchase or observe for free additional information before reaching a final decision. I find that subjects’ behaviour over time converges toward optimal decisions prior to observing an imperfect information signal. However, when subjects observe an imperfect information signal prior to their terminal choice there is greater deviation from optimal behaviour. I find in addition to behaviour that is reflective of a risk-neutral BEU maximizer, status quo bias, over-weighing the informational value of the message received and past statistically independent outcomes influencing future choices. The subjects’ willingness to pay (WTP) to use the additional information gathered from an imperfect message service when making a final decision was on average less than the risk neutral BEU willingness to pay benchmark. Moreover, as the informative value of the message increased, causing the BEU valuation to increase, subjects under-estimated the value of the message signal to a greater degree. Although risk attitudes may have influenced the subjects’ WTP decisions, it does not account for the increased conservative WTP behaviour when information became more valuable. Additionally, the findings from this study suggest that individuals adopt different decision rules depending on both personal attributes (i.e. skillset, gender, experience) and on the context and environment in which the decision task is conducted. en_US
dc.description.sponsorship SSHRC grant: Social Sciences and Humanities Research Council via Dr. Bram Cadsby Professor Department of Economics, University of Guelph en_US
dc.language.iso en en_US
dc.subject Economics Rational Decision Theory Experimental and Behavioural Economics Bayesian Expected Utility Theory Reinforcement Learning Models status quo bias uncertainty imperfect information risk preferences en_US
dc.title Choice Under Uncertainty: Violations of Optimality in Decision Making en_US
dc.type Thesis en_US
dc.degree.programme Economics en_US
dc.degree.name Doctor of Philosophy en_US
dc.degree.department Department of Economics en_US
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