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

Is Satisficing Absorbable? An Experimental Study

“…The latter result is in line with that by Fellner et al (2005), who found no significant difference in average earnings between subjects who comply with bounded rationality requirements and others.…”

“…The decision tasks, previously studied by Fellner et al (2005) without inducing and testing for theory absorption, are financial investment tasks with state-specific return rates, and states that can be ordered from the worst to the best. We allow for two or three equally probable states of nature.…”

“…Most previous research on aspirations and satisficing behavior has advanced the modelling of aspiration adaptation, and explored its role in bilateral interactions (see, e.g., Tietz et al, 1978;Tietz, 1992;1997;Selten, 1998). Fellner et al (2005) apply the satisficing approach to investment decisions by employing a free mode: participants in their experiment are free to choose inconsistent aspirations. What is distinctive in our study is that, in 1 More generally, the set of satisficing portfolios is the intersection of n linear half-spaces, where n is the number of different states of nature.…”

“…To render it applicable, we rely on portfolio selection tasks where aspirations are state-specific, i.e., dependent on the possible state of nature (see Fellner et al, 2005). Such state-specific aspirations are said to be consistent when they define a non-empty set of satisficing portfolios.…”

Satisficing in portfolio selection—Theoretical aspects and experimental tests

“…The first experiment (Fellner, Güth, and Maciejovsky, 2005) concentrated on the scenario of Table 1 Note: ** and * denote significance on the 1 % and 5 % level, respectively. …”