John Hey (University of York)
| Dates: | 24 November 2016 |
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| Times: | 16:15 - 17:45 |
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| What is it: | Seminar |
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| Organiser: | School of Social Sciences |
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| Speaker: | John Hey |
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Title: Testing Manski’s Theory of Satisficing
Abstract: In 1955, when economics was driven by the obsession of optimising, Simon introduced a radically new theory, which he called ‘satisficing’. Crucial to Simon’s theory was the notion of an ‘aspiration level’, which the decision-maker considered satisfactory. However, he did not articulate how such aspiration levels are formed; nor did he specify when the decision-maker should satisfice rather than optimise. Since Simon’s paper, many economists have tried to produce theories of ‘satisficing’ behaviour. Amongst these theories are search theories, theories of rational inattention, models of behaviour under ambiguity and models of imprecise preferences. But all these theories seem to lack the key element of Simon’s story: namely that there are costs to thinking, costs to deliberation. Such costs are the crucial component of a new theory advanced by Charles Manski in a working paper with the title “Optimise, Satisfice or Choose Without Deliberation?”. In this he incorporates a cost of deliberation. His theory shows that satisficing is the best decision if the cost of thinking is sufficiently smaller than the cost which reveals the action that yields the maximum payoff. Moreover, his theory explains how aspiration levels are determined. We report on an experiment testing Manski’s theory. We show that parts of it appear to be empirically valid. It seems to be a step in the right direction.
Speaker
John Hey
Role: Emeritus Professor of Economics and Statistics
Organisation: University of York
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Arthur Lewis Building
Manchester
