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Complexity and biases

Published online by Cambridge University Press:  14 March 2025

Kenan Kalaycı  and
Marta Serra-Garcia
Kenan Kalaycı*
Affiliation:
School of Economics, University of Queensland, Colin Clark Building (39), St. Lucia, Brisbane, QLD 4072, Australia
Marta Serra-Garcia*
Affiliation:
Rady School of Management, UCSD, 9500 Gilman Dr., La Jolla, CA 92093, USA
*
[email protected]
[email protected]
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Abstract

We examine experimentally how complexity affects decision-making, when individuals choose among different products with varying benefits and costs. We find that complexity in costs leads to choosing a high-benefit product, with high costs and overall lower payoffs. In contrast, when complexity is in the benefits of the product, we cannot reject the hypothesis of random mistakes. We also examine the role of heterogeneous complexity. We find that individuals still (mistakenly) choose the high-benefit but costly product, even if cheaper and simple products are available. Our results suggest that salience is a main driver of choices under different forms of complexity.

Keywords

ComplexityMistakesCredit ChoiceExperimentSalience

JEL classification

D14: Household Saving • Personal Finance C91: Laboratory, Individual Behavior
Type
Original Paper
Information
Experimental Economics , Volume 19 , Issue 1 , March 2016 , pp. 31 - 50
Copyright
Copyright © 2015 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-015-9434-3) contains supplementary material, which is available to authorized users.

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