Aspiration formation and satisficing in search with(out) competition

Abstract

We experimentally explore individual and competitive search, and we test whether generally accepted principles of bounded rationality adequately explain observed search behavior. Subjects can, at a cost, employ screening and selection methods not only facilitating search but also directly revealing their aspirations. Most subjects follow the single threshold heuristic after extensive experimentation. Surprisingly, aspiration levels are set below the maximum value of all previously inspected alternatives. In competitive search, subjects tend to experiment less before engaging in satisficing and generally state lower aspirations. Finally, systematic satisficing seems to pay off.sequential search, secretary problem, optimal stopping, bounded rationality,

Satisficing in financial decision making — a theoretical and experimental approach to bounded rationality

“…Future research should proceed to more complex aspiration ladders by distinguishing, for instance, more, i.e., intermediate, states of the world. In fact, the basic framework of satisficing presented here has been generalized and extended (see, for instance, Fellner et al (2006a), Fellner, Güth, andMartin (2006b), Güth (2008) and Güth et al (2008b)), and introduced into other fields of decision making, such as sequential search (Güth, Martin & Weiland, 2006) or social interaction (Berninghaus, Güth, Levati & Qiu, 2006;Güth, Levati & Ploner, 2008a). The aim of this paper was to further advance bounded rationality theory by making it more tangible and testing its predictive power, so that ultimately some of the initial speculations, for instance, on risk attitude and satisficing, can be replaced by more systematic empirical findings.…”

Satisficing Players

“…Again the quality of the selected candidate yields a lower bound for the aspired quality. Güth and Weiland (2011) have tried to circumvent this limitation in their experiment by offering participants routines which save search costs but also reveal aspirations more directly.…”

“…The experimental research initially concentrated on decision theoretic tasks without strategic interaction (e.g. Fellner et al, 2009, Güth and Weiland, 2011 before trying to study strategic interaction (e.g. Berninghaus et al, 2011, andGüth et al, 2012).…”

“…Note 15. Güth and Weiland (2011) review some such attempts for the secretary search problem but elicit aspirations directly by devices allowing participants to save search costs and experimenters to observe aspirations. Note 17.…”

When to stop — A cardinal secretary search experiment

“…Financial markets with stationary random-walk assets whose traders have to invest immediately could also be similar to our setup. Unlike Güth and Weiland (2011) we have neglected competition in search.…”