A simple satisficing model
Erlend Dancke Sandorf (Norwegian University of Life Sciences (NMBU))
Danny Campbell (Stirling University Management School, Scotland)
Caspar Chorus (TU Delft - Industrial Design Engineering)
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Abstract
Economic theory is built on the assumption that people are omniscient utility maximizers. In reality, this is unlikely to be true and often people lack information about all alternatives that are available to them; either because the information is unavailable or that the cost of searching for and evaluating that information is high. In this paper, we develop a simple and tractable model that captures satisficing behavior. We show that the model can retrieve consistent parameters under a large range of experimental conditions. We test our model on synthetic data and present an empirical application. We discuss the implications of our results for the use of satisficing choice models in explaining choice.
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