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Task Transcending Satisficing - An Experimental Study

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  • Werner Güth
  • Gerlinde Fellner
  • Ev Martin

Abstract

The paper explores the applicability of bounded rationality theory. In particular, we investigate whether basic principles of aspiration formation and satisficing behavior are transferable between similar situations. Individuals are sequentially confronted with two risky investment tasks, a simple and a more complex one. Initially elicited state-contingent aspirations can be used to predict actual portfolio selection in both tasks. We explore whether individual characteristics of satisficing apply to both scenarios. Results indicate that stated aspirations frequently cannot be fulfilled. However, aspiration formation itself is highly transferable between tasks.

Suggested Citation

  • Werner Güth & Gerlinde Fellner & Ev Martin, 2006. "Task Transcending Satisficing - An Experimental Study," Papers on Strategic Interaction 2006-09, Max Planck Institute of Economics, Strategic Interaction Group.
    • Handle: RePEc:esi:discus:2006-09
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    File URL: ftp://papers.econ.mpg.de/esi/discussionpapers/2006-09.pdf
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    References listed on IDEAS

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    4. Gerlinde Fellner & Werner Güth & Boris Maciejovsky, 2005. "Satisficing in Financial Decision Making A Theoretical and Experimental Attempt to Explore Bounded Rationality," Papers on Strategic Interaction 2005-23, Max Planck Institute of Economics, Strategic Interaction Group.
    5. Selten, Reinhard, 1998. "Features of experimentally observed bounded rationality," European Economic Review, Elsevier, vol. 42(3-5), pages 413-436, May.
    6. Ernst Fehr & Klaus Schmidt, 2005. "The Rhetoric of Inequity Aversion- A Reply," NajEcon Working Paper Reviews 666156000000000616, www.najecon.org.
    7. Ben Greiner, 2004. "The Online Recruitment System ORSEE 2.0 - A Guide for the Organization of Experiments in Economics," Working Paper Series in Economics 10, University of Cologne, Department of Economics.
    8. Ben Greiner, 2004. "The Online Recruitment System ORSEE - A Guide for the Organization of Experiments in Economics," Papers on Strategic Interaction 2003-10, Max Planck Institute of Economics, Strategic Interaction Group.
    9. Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
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    Cited by:

    1. Morone, Andrea & Sandri, Serena & Fiore, Annamaria, 2009. "On the absorbability of informational cascades in the laboratory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 728-738, October.
    2. Werner Güth, 2006. "Satisficing in Portfolio Selection - Theoretical Aspects and Experimental Tests," Papers on Strategic Interaction 2006-16, Max Planck Institute of Economics, Strategic Interaction Group.
    3. Werner Güth & Gerlinde Fellner & Ev Martin, 2006. "Satisficing or Optimizing? - An Experimental Study," Papers on Strategic Interaction 2006-11, Max Planck Institute of Economics, Strategic Interaction Group.
    4. Schwartz, Hugh, 2008. "The role of aspirations and aspirations adaptation in explaining satisficing and bounded rationality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(3), pages 949-957, June.

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    More about this item

    Keywords

    bounded rationality; aspirations; investment decisions;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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