The relevance of irrelevant information
- PDF / 1,021,257 Bytes
- 34 Pages / 439.37 x 666.142 pts Page_size
- 15 Downloads / 212 Views
The relevance of irrelevant information Ian Chadd1 · Emel Filiz‑Ozbay2 · Erkut Y. Ozbay2 Received: 2 December 2019 / Revised: 6 October 2020 / Accepted: 8 October 2020 © Economic Science Association 2020
Abstract This paper experimentally investigates the effect of introducing unavailable alternatives and irrelevant information regarding the alternatives on the optimality of decisions in choice problems. We find that the presence of unavailable alternatives and irrelevant information generates suboptimal decisions with the interaction between the two amplifying this effect. Irrelevant information in any dimension increases the time costs of decisions. We also identify a “preference for simplicity” beyond the desire to make optimal decisions or minimize time spent on a decision problem. Keywords Presentation set · Bounded rationality · Simplicity · Costly ignorance · Free disposal of information JEL Classification D03 · D83 · D91
1 Introduction In many decision problems, unavailable options along with irrelevant attributes are presented to decision makers. For example, consider a new employee of a large firm in the United States who must choose a health insurance plan. Among the many We thank Gary Charness, Mark Dean, Allan Drazen, Daniel Martin, Yusufcan Masatlioglu, Pietro Ortoleva, Ariel Rubinstein, and Lesley Turner for helpful comments and fruitful discussions. We also would like to thank our anonymous reviewers for useful suggestions. Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1068 3-020-09687-3) contains supplementary material, which is available to authorized users. * Ian Chadd [email protected] Emel Filiz‑Ozbay [email protected] Erkut Y. Ozbay [email protected] 1
Department of Economics, Rensselaer Polytechnic Institute, Troy, NY, USA
2
Department of Economics, University of Maryland, College Park, MD, USA
13
Vol.:(0123456789)
I. Chadd et al.
plans listed in their benefits handbook are some plans that are only available to employees of a high enough rank (e.g. team leads, managers, vice presidents) and so are “unavailable" to this new employee. Nevertheless, they can see premiums, coverage amounts, co-pays, etc. for these unavailable plans in the same way that they can see this information for plans that the employee can actually choose. Additionally, even among these plans some of this information might not be valuable. For example, if this new employee takes no regular specialty medication and always chooses generic medications, coverage for branded prescription drugs is irrelevant. Consider some additional examples of unavailable alternatives:1 In a restaurant menu, unavailable items may still be listed in the menu with a “sold out” note. A local event ticket website may list events that are sold-out. Also, consider some more examples of irrelevant attributes: Insurance coverage for care related to pregnancy may be presented to someone who could never get pregnant. The US Food and Drug Administration requires standardized nutrition label o
Data Loading...
