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Experimental Economics

, Volume 19, Issue 1, pp 31–50 | Cite as

Complexity and biases

  • Kenan Kalaycı
  • Marta Serra-Garcia
Original Paper

Abstract

We examine experimentally how complexity affects decision-making, when individuals choose among different products with varying benefits and costs. We find that complexity in costs leads to choosing a high-benefit product, with high costs and overall lower payoffs. In contrast, when complexity is in the benefits of the product, we cannot reject the hypothesis of random mistakes. We also examine the role of heterogeneous complexity. We find that individuals still (mistakenly) choose the high-benefit but costly product, even if cheaper and simple products are available. Our results suggest that salience is a main driver of choices under different forms of complexity.

Keywords

Complexity Mistakes Credit Choice Experiment Salience 

JEL Classification

C91 D03 D14 G02 

Notes

Acknowledgments

We would like to thank David Cooper, Enrique Fatas, Paul Frijters, Changxia Ke, Alex Imas, Nikos Nikiforakis, Wieland Müller, Matteo Ploner, Jan Potters and Philipp Wichardt for their comments, as well as the audiences at the University of Munich, 6th Annual Australia New Zealand Workshop on Experimental Economics at Monash University, 2011 European Workshop on Behavioral and Experimental Economics at the University of Munich, 2011 North-American ESA Meeting, 2012 MBEES at Maastricht University and 2012 Experimental Finance Conference at the University of Luxembourg for their comments and suggestions.

Supplementary material

10683_2015_9434_MOESM1_ESM.pdf (218 kb)
Supplementary material 1 (PDF 218 kb)

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Copyright information

© Economic Science Association 2015

Authors and Affiliations

  1. 1.School of EconomicsUniversity of QueenslandBrisbaneAustralia
  2. 2.Rady School of ManagementUCSDLa JollaUSA

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