Abstract
This paper is about satisficing behaviour. Rather tautologically, this is when decision-makers are satisfied with achieving some objective, rather than in obtaining the best outcome. The term was coined by Simon (Q J Econ 69:99–118, 1955), and has stimulated many discussions and theories. Prominent amongst these theories are models of incomplete preferences, models of behaviour under ambiguity, theories of rational inattention, and search theories. Most of these, however, seem to lack an answer to at least one of two key questions: when should the decision-maker (DM) satisfice; and how should the DM satisfice. In a sense, search models answer the latter question (in that the theory tells the DM when to stop searching), but not the former; moreover, usually the question as to whether any search at all is justified is left to a footnote. A recent paper by Manski (Theory Decis. doi:10.1007/s11238-017-9592-1, 2017) fills the gaps in the literature and answers the questions: when and how to satisfice? He achieves this by setting the decision problem in an ambiguous situation (so that probabilities do not exist, and many preference functionals can therefore not be applied) and by using the Minimax Regret criterion as the preference functional. The results are simple and intuitive. This paper reports on an experimental test of his theory. The results show that some of his propositions (those relating to the ‘how’) appear to be empirically valid while others (those relating to the ‘when’) are less so.
Highlights
Way back in 1955 Herbert Simon made a call for a new kind of economics stating that the task is to replace the global rationality of economic man with a kind of rational behavior that is compatible with the access to information and the computational capacities that are possessed by organisms, including man, in the kinds of environment in which such organisms exist. (p 99)
We analyse the number of rounds of satisficing by comparing the
‘stating a plan’ is not straightforward— would subjects have to state whether they want to have ‘No Deliberation’, ‘Optimise’ or ‘Satisfice’, they would have to specify their rules for choosing their aspiration levels
Summary
If ‘Satisficing’ is chosen, the aspiration level is midway between the relevant lower bound and the relevant upper bound, while the number of deliberation rounds is decreasing in its associated cost This theory is different from the existing search literature in that it provides the concept of satisficing search that follows more closely Simon’s perception of adaptive aspiration levels than standard search models. Subjects were informed of the lower (L) and upper (U ) bounds on the payoffs in each problem; these were fixed at 1 and 100, respectively They were told the two types of cost: the cost of finding out whether there are any payoffs greater or equal to some specified aspiration level (k) and the cost of finding the highest payoff (K ). This experiment was run using purpose-written software written (mainly by Paolo Crosetto) in Python 2.7
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