We invite you to a FAIR Seminar with Kirby Nielsen. Kirby is a Professor of Economics and William H. Hurt Scholar in Caltech's Division of the Humanities and Social Sciences. Her research interests are in experimental economics, decision theory, and microeconomic theory.
Title: Procedural Decision-Making In The Face Of Complexity
Abstract: A large body of work documents that complexity affects individuals’ choices, but the literature has remained mostly agnostic about why. We provide direct evidence that individuals use different choice processes for complex and simple decisions. We hy- pothesize that individuals resort to “procedures”—cognitively simpler choice processes that we characterize as being easier to describe to another person—as the complex- ity of the decision environment increases. We test our hypothesis using two experi- ments, one with choices over lotteries and one with choices over charities. We exoge- nously vary the complexity of the decision environment and measure the describability of choice processes by how well another individual can replicate the decision-maker’s choices given the decision-maker’s description of how they chose. We find strong sup- port for our hypothesis: Both of our experiments show that individuals’ choice processes are more describable in complex choice environments, which we interpret as evidence that decision-making becomes more procedural as complexity increases. We show that procedural decision-makers choose more consistently and exhibit fewer dominance vi- olations, though we remain agnostic about the causal effect of procedures on decision quality. Additional secondary evidence suggests that procedural decision-making is a choice simplification that reduces the cognitive costs of decision-making.