Are More Alternatives Better for Decision-Makers? A Note on the Role of Decision Cost

Abstract

While the traditional economic wisdom believes that an individual will become better off by being given a larger opportunity set to choose from, in this paper we question this belief and build a formal theoretical model that introduces decision costs into the rational decision process. We show, under some reasonable conditions, that a larger feasible set may actually lower an individual’s level of satisfaction. This provides a solid economic underpinning for the Simon prediction. Copyright Springer 2005bounded rationality, considered subset, decision cost, D11, D83,

Travel information as an instrument to change cardrivers’ travel choices: a literature review

“…Moving to the topic of information acquisition costs, it is widely acknowledged throughout the social sciences that the non-monetary costs of acquiring information (in the sense of searching for and processing information) may be substantial in terms of effort, time, attention and the possibility to forego already found alternatives 8 (e.g. Simon, 1955Simon, , 1978Weibull, 1978;Shugan, 1980;Smith, 1991;Payne et al, 1993;Hauser et al, 1993;Mehta et al, 2003;Lu et al, 2005). Many traveler behaviour studies suggest that this general insight is particularly applicable to the context of travel choice making, where travelers dislike to engage in a lengthy search-and decision-process, and rather apply myopic or heuristic decision strategies (Foerster, 1978;Hey, 1982;Richardson, 1982;Polak and Jones, 1993;Stern, 1999;Fujiwara et al, 2004;Jou et al, 2005).…”