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| Author: | Sonsino, D. Benzion, U. Mador, G. |
| Title: | The complexity effects on choice with uncertainty - experimental evidence |
| Journal: | Economic Journal
2002 : OCT, VOL. 112:482, p. 936-965 |
| Index terms: | Financial forecasting Individual behaviour Complexity Uncertainty Economic theory |
| Language: | eng |
| Abstract: | The authors present experimental evidence suggesting that human subjects dislike complexity in choice with uncertainty. The results suggest that the probability of choosing a given alternative decreases with the relative complexity of that alternative. Complexity increases the noise in the choice process and the changes that the inferior alternaive will be selected. The results contradict the predictions of expected utility theory and intuitively appealing axioms like 'stochastic dominance' and 'convexity'. These 'complexity effects' may lead to inefficient portfolio selection. |
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