Abstract
Abstract This paper extends choice theory by allowing for the interaction between cognitive costs and imitative dynamics. The authors experimentally investigate the role of imitation when participants face a task which is costly in cognitive terms. In order to disentangle different choice dynamics, they devise a laboratory experiment with a novel experimental task in which they model the choice of different alternatives through high or low cognitive costs and feedback information provided to subjects. Their results provide evidence for imitative behavior driven by under-confidence about own skills and by the beliefs regarding others’ performance. They also find a temporal pattern in the distribution of choices, both in the highcost and low-cost cognitive conditions, that may represent another cognitive shortcut.
Highlights
In every day life decision makers frequently face cognitive costs when choosing among different options
The perspective from which we consider peer effects here is that according to which the behavior of other individuals in a reference community may represent a simplifying heuristic, that allows to economize on decision costs, especially when choices carry high cognitive costs
This paper investigates the role played by cognitive costs in contexts involving social interactions and sheds more light on the determinants of imitative behavior
Summary
In every day life decision makers frequently face cognitive costs when choosing among different options. The axiom of complete preferences, which entails that an individual is able to compare and express a preference relation between any two objects, requires conditions such as extraordinary computational and cognitive skills that are rarely met in practice. It follows that, in many circumstances, economic actors are boundedly rational and make use of simplifying heuristics, either conscious or unconscious, when they process information that carries cognitive costs (Gigerenzer and Gaissmaier, 2011). A potential channel through which this heuristic operates is the belief system about the quality of others’ choices
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