A statistical test for the optimality of deliberative time allocation.

Abstract

Whenever we make a choice, we must also decide how much time to spend making it. Many theories of decision-making crucially assume that this deliberation perfectly balances the costs of time expenditure and the benefits of better decisions. However, might we "overthink" or "underthink" decisions? Here, I propose and implement a method to precisely determine whether people are optimally spending their time on deliberation, accounting for individual preferences. This test evaluates the consistency of underlying preferences for time when incentives change, which is a necessary condition for optimality. This enables a more comprehensive analysis of rationality in a variety of contexts. I demonstrate how the test can reveal departures from optimality using two motion discrimination experiments in which I vary task difficulty and monetary incentives.