Stochastic choice and the allocation of cognitive effort

Moffatt, Peter (2005) Stochastic choice and the allocation of cognitive effort. Experimental Economics, 8. pp. 369-388.

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Abstract

Data from a risky choice experiment are used to estimate a fully parametric stochastic model of risky choice. As is usual with such analyses, Expected Utility Theory is rejected in favour of a form of Rank Dependent Theory. Then an estimate of the risk aversion parameter is deduced for each subject, and this is used to construct a measure of the “closeness to indifference'' of each subject in each choice problem. This measure is then used as an explanatory variable in a random effects model of decision time, with other explanatory variables being the complexity of the problem, the financial incentives, and the amount of experience accumulated at the time of performing the task. The most interesting finding is that significantly more effort is allocated to problems in which subjects are close to indifference. This presents us with another reason (in addition to statistical information considerations) why such tasks should play a prominent role in experiments.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences > School of Economics
UEA Research Groups:	Faculty of Social Sciences > Research Centres > Centre for Behavioural and Experimental Social Sciences Faculty of Social Sciences > Research Groups > Applied Econometrics And Finance Faculty of Social Sciences > Research Groups > Behavioural Economics
Depositing User:	Gina Neff
Date Deposited:	13 Jan 2011 11:13
Last Modified:	09 Aug 2023 14:30
URI:	https://ueaeprints.uea.ac.uk/id/eprint/10941
DOI:	10.1007/s10683-005-5375-6

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