ICES Seminar in Experimental Economics and Game Theory
Choosing to search: Choice with a default option
Friday, April 12, 2024 12:00 PM to 1:00 PM EDT
Vernon Smith Hall (formerly Metropolitan Building), 5183
The ICES Seminar in Experimental Economics and Game Theory of the Spring 2024 semester will feature:
Rensselaer Polytechnic Institute
Choosing to search: Choice with a default option
Abstract
In the presence of a default option, the optimal search rule for an agent with a reference-dependent utility and a search cost predicts: (i) the default increases the reservation utility due to the reference effect, leading to a better choice, and (ii) those with higher reservation utility will self-select into search and are more likely to find a superior option. Our experiments document the presence of both effects. Those who reject the default are likely to find higher-ranked options in their active search, supporting the self-selection effect. Even when the self-selection channel is shut down, the reference effect remains.
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