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Simple Models for Multiattribute Choice with Many Alternatives: When It Does and Does Not Pay to Face Trade-offs with Binary Attributes

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  • Robin M. Hogarth

    (ICREA and Universitat Pompea Fabra, DEE 08005 Barcelona, Spain)

  • Natalia Karelaia

    (HEC (Ecole des Hautes Études Commerciales), Université de Lausanne, Internef, 1015 Lausanne-Dorigny, Switzerland)

Abstract

Given the difficulties people experience in making trade-offs, what are the consequences of using simple models that avoid trade-offs? We examine choices by such models in environments where "true" preferences are linear and attributes are characterized by binary attributes. A deterministic elimination-by-aspects (DEBA) model is highly effective over a range of conditions. When preferences are quite compensatory, however, a modified equal weighting (EW) model that uses DEBA to resolve ties is more effective. We explore the sensitivity of results to errors in using DEBA, to different distributions of alternatives, and to error in "true" preferences. Under the conditions examined here, the outcomes of these "boundedly rational" models are highly consistent with "rational" models that explicitly confront trade-offs. We emphasize the importance of binary attributes in reaching these conclusions.

Suggested Citation

  • Robin M. Hogarth & Natalia Karelaia, 2005. "Simple Models for Multiattribute Choice with Many Alternatives: When It Does and Does Not Pay to Face Trade-offs with Binary Attributes," Management Science, INFORMS, vol. 51(12), pages 1860-1872, December.
    • Handle: RePEc:inm:ormnsc:v:51:y:2005:i:12:p:1860-1872
    DOI: 10.1287/mnsc.1050.0448
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    References listed on IDEAS

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    1. Manel Baucells & Juan A. Carrasco & Robin M. Hogarth, 2008. "Cumulative Dominance and Heuristic Performance in Binary Multiattribute Choice," Operations Research, INFORMS, vol. 56(5), pages 1289-1304, October.
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    3. Keeney,Ralph L. & Raiffa,Howard, 1993. "Decisions with Multiple Objectives," Cambridge Books, Cambridge University Press, number 9780521438834, January.
    4. Robin Hogarth & Natalia Karelaia, 2004. "Ignoring information in binary choice with continuous variables: When is less 'more'?," Economics Working Papers 742, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2004.
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    7. Chater, Nick & Oaksford, Mike & Nakisa, Ramin & Redington, Martin, 2003. "Fast, frugal, and rational: How rational norms explain behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 90(1), pages 63-86, January.
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    More about this item

    Keywords

    decision making; bounded rationality; lexicographic rules; choice theory;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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