Heuristic decision making in network linking

Abstract

Network formation among individuals constitutes an important part of many OR processes, but relatively little is known about how individuals make their linking decisions in networks. This article provides an investigation of heuristic effects in individual linking decisions for network formation in an incentivized lab-experimental setting.Our mixed logit analysis demonstrates that the inherent complexity of the network linking setting causes individuals' choices to be systematically less guided by payoff but more guided by simpler heuristic decision cues, and that this shift is systematically stronger for social payoff than for own payoff. Furthermore, we show that the specific complexity factors value transferability and social tradeoff aggravate the former effect.These heuristic effects have important research and policy implications in areas that involve network formation.JEL Classification: A14, C25, C91, D85

Multifactorial effects on bounded rational decision-making

“…Subsequent research has investigated the role of bounded rationality and the utility of heuristics in facilitating accurate judgments under conditions conducive to their use [42]. The availability heuristic expedites judgment by prioritizing information that is easily recalled, potentially leading to an overestimation of its importance or frequency [43]. This bias is prominent in various decision-making scenarios, from routine choices to critical evaluations [44].…”