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Complexity Aversion: Simplification in the Herrnstein and Allais Behaviors

Author

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  • James Stodder

    (Rensselaer Polytechnic Institute)

Abstract

The sub-optimal "meliorating" behavior studied by Herrnstein shows that all known animal species match average and not marginal payoffs. When information processing is costly, Herrnstein’s matching and a similar simplifying "paradox" discovered by Allais may be efficient for agents averse to the risk of making errors. Such simplification is likely to be an evolutionarily stable strategy. Differential aversion to errors can lead to different estimates, even without differences in estimating ability.

Suggested Citation

  • James Stodder, 1997. "Complexity Aversion: Simplification in the Herrnstein and Allais Behaviors," Eastern Economic Journal, Eastern Economic Association, vol. 23(1), pages 1-15, Winter.
    • Handle: RePEc:eej:eeconj:v:23:y:1997:i:1:p:1-15
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume23/V23N1P1_15.pdf
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    Cited by:

    1. J. Barkley Rosser, 1999. "On the Complexities of Complex Economic Dynamics," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 169-192, Fall.
    2. Peter Moffatt & Stefania Sitzia & Daniel Zizzo, 2015. "Heterogeneity in preferences towards complexity," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 147-170, October.
    3. B. Douglas Bernheim & Charles Sprenger, 2020. "On the Empirical Validity of Cumulative Prospect Theory: Experimental Evidence of Rank‐Independent Probability Weighting," Econometrica, Econometric Society, vol. 88(4), pages 1363-1409, July.
    4. Wakker, Peter P., 2023. "A criticism of Bernheim & Sprenger's (2020) tests of rank dependence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    5. Fogliatto, Flavio S. & da Silveira, Giovani J.C., 2008. "Mass customization: A method for market segmentation and choice menu design," International Journal of Production Economics, Elsevier, vol. 111(2), pages 606-622, February.

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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