The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment

Schunk, Daniel and Winter, Joachim (February 2007): The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment. Discussion Papers in Economics 2007-9

Abstract

Experimental studies of search behavior suggest that individuals stop searching earlier than predicted by the optimal, risk-neutral stopping rule. Such behavior could be generated by two different classes of decision rules: rules that are optimal conditional on utility functions departing from risk neutrality, or heuristics derived from limited cognitive processing capacities and satisfycing. To discriminate among these two possibilities, we conduct an experiment that consists of a standard search task as well as a lottery task designed to elicit utility functions. We find that search heuristics are not related to measures of risk aversion, but to measures of loss aversion.

• Item Type: Paper
• Keywords: search; heuristics; utility function elicitation; risk attitudes; prospect theory
• Faculties: Economics; Economics > Munich Discussion Papers in Economics; Economics > Munich Discussion Papers in Economics > Behavioral Economics; Economics > Chairs > Chair of Empirical Economics
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: D83, C91
• Language: English