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On the Causes and Consequences of Deviations from Rational Behavior

Author

Listed:
  • Strittmatter, Anthony

    (University of St. Gallen)

  • Sunde, Uwe

    (LMU Munich)

  • Zegners, Dainis

    (Erasmus University Rotterdam)

Abstract

This paper presents novel evidence for the prevalence of deviations from rational behavior in human decision making – and for the corresponding causes and consequences. The analysis is based on move-by-move data from chess tournaments and an identification strategy that compares behavior of professional chess players to a rational behavioral benchmark that is constructed using modern chess engines. The evidence documents the existence of several distinct dimensions in which human players deviate from a rational benchmark. In particular, the results show deviations related to loss aversion, time pressure, fatigue, and cognitive limitations. The results also demonstrate that deviations do not necessarily lead to worse performance. Consistent with an important influence of intuition and experience, faster decisions are associated with more frequent deviations from the rational benchmark, yet they are also associated with better performance.

Suggested Citation

  • Strittmatter, Anthony & Sunde, Uwe & Zegners, Dainis, 2020. "On the Causes and Consequences of Deviations from Rational Behavior," Rationality and Competition Discussion Paper Series 246, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:246
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    More about this item

    Keywords

    Rational strategies; artificial intelligence; behavioral bias;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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