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Trial Title
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Decision-making Process, Rational Choice and Welfare
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Decision-making Procedures, Rational Choice and Welfare
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Abstract
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This paper studies the impact of decision-making processes on individuals’ rationality and welfare. We theoretically and experimentally study a specific decision-making process, sequential elimination in which a decision-maker has to sequentially eliminate options that are least preferred in the decision problem, one by one until only one option remains. First, we provide a necessary and sufficient condition that sequential elimination results in consistent choice while direct decision-making may not. Then we experiment to examine the treatment effect of sequential elimination on the choice consistency by comparing choice data in three treatment groups: direct decision-making, sequential elimination and process selection. We also have an incentive-compatible design in which participants can revise their choice to test decision makers' awareness of "mistake" in making choices. We also ask the participants' satisfaction with their choices and decision-making processes as criteria for welfare. We hypothesized decision makers who use sequential elimination have a higher level of consistency, less likely to change their choices and are more satisfied with their decisions. We control for preference for consistency, preference for consequentialism and sunk cost effects,
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After
This paper studies the impact of decision-making procedures on individuals’ rationality and welfare. We theoretically and experimentally study a specific decision-making procedure, sequential elimination in which a decision-maker has to sequentially eliminate options that are not preferred in the decision problem, one by one, until only one option remains. First, we provide a necessary and sufficient condition that sequential elimination results in consistent choice while direct decision-making may not. Then we experiment to examine the treatment effect of sequential elimination on the choice consistency by comparing choice data in three treatment groups: sequential examination, sequential elimination and procedure selection. We also have an incentive-compatible design in which participants can revise their choice to test decision makers' awareness of "mistake" in making choices. We also ask the participants' satisfaction with their choices and decision-making processes as criteria for welfare. We hypothesize that decision makers who use sequential elimination have a higher level of consistency, less likely to change their choices and are more satisfied with their decisions. We control for preference for consistency, preference for consequentialism and sunk cost effects,
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Trial Start Date
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March 09, 2020
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May 31, 2020
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Trial End Date
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March 13, 2020
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June 01, 2020
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Last Published
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March 07, 2020 01:31 PM
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May 29, 2020 09:05 PM
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Intervention Start Date
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March 09, 2020
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May 31, 2020
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Intervention End Date
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March 13, 2020
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June 01, 2020
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Primary Outcomes (End Points)
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The key outcome variables in this experiment are consistency scores measured by the choice data, as indicators of rationality. They include Generalized Axiom of Revealed Preference (GARP) violations (Varian 1982), Afriat’s (1967, 1972) critical cost efficiency index (CCEI) and swaps index (Apesteguia and Ballester, 2015). We will compare all consistency scores of individuals under different treatments.
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The key outcome variables in this experiment are consistency scores measured by the choice data, as indicators of rationality. They include Generalized Axiom of Revealed Preference (GARP) violations (Varian 1982), Houtman-Maks' index (Houtman and Maks, 1985), Afriat’s (1967, 1972) critical cost efficiency index (CCEI) and swaps index (Apesteguia and Ballester, 2015). We will compare all consistency scores of individuals under different treatments.
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Primary Outcomes (Explanation)
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We follow the literature to construct our outcome variables with choice data. The GARP violations index counts how many combinations of choices violate GARP. The CCEI measures the proportion of income that a person wasted by making the choice that violated revealed preference. The swaps index finds the minimized weighted sum of numbers of alternatives in a menu that must be swapped with the chosen one in order to make the choice of a consistent with the maximization of a preference.
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We follow the literature to construct our outcome variables with choice data. The GARP violations index counts how many combinations of choices violate GARP. The Houtman-Maks' index finds the minimal subset of observations that needs to be removed from the data in order to make the remainder rationalizable. The CCEI measures the proportion of income that a person wasted by making the choice that violated revealed preference. The swaps index finds the minimized weighted sum of numbers of alternatives in a menu that must be swapped with the chosen one in order to make the choice of a consistent with the maximization of a preference.
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Experimental Design (Public)
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We design an online experiment via Qualtrics, which will take approximately 40 minutes. We recruit participants from the Behavioral Experimental Sciences Laboratory (BESLab) in Barcelona. Participants will need to come to the lab and complete the experiment on Qualtrics in the lab. The experiment consists of three sections. In Section 1, each participant has to make choices in economic decision problems, either with a randomly assigned decision-making process or with her preferred decision-making process. In Section 2, we have four tests to measure cognitive function, including the International Cognitive Ability Resource (ICAR), the cognitive reflection test (CRT), the Stroop Color and Word Test (SCWT) and the Sternberg task. In Section 3, we collect information about participants’ preference for rational choice and choice process. Lastly, we ask participants for their demographic information, including gender, nationality, age, English level, education level and field of study.
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We design an online experiment via Qualtrics, which will take approximately 35 minutes. We recruit participants from the Prolific. The experiment consists of three sections. In Section 1, each participant has to make choices in economic decision problems, either with a randomly assigned decision-making procedure or with her preferred decision-making procedure. In Section 2, we have three tests to measure cognitive function, including the International Cognitive Ability Resource (ICAR), the Stroop Color and Word Test (SCWT) and the Sternberg task. In Section 3, we collect information about participants’ preference for rational choice and choice process. Lastly, we ask participants for their demographic information, including gender, nationality, age, English level, education level and field of study.
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Sample size (or number of clusters) by treatment arms
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80 individuals treatment 1 (direct decision-making), 80 individuals treatment 2 (sequential elimination), 100 individuals treatment 3 (process selection)
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80 individuals treatment 1 (sequential examination), 80 individuals treatment 2 (sequential elimination), 100 individuals treatment 3 (procedure selection)
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Intervention (Hidden)
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Before
In the study, participants will be asked to make choices in economic decision problems. Participants will randomly be assigned into three treatment groups: direct decision-making, sequential elimination, process selection. In the direct decision-making group, subjects directly choose their most preferred options in each decision problem. In the sequential elimination group, subjects have to sequentially eliminate their least preferred options until all alternatives but one are eliminated. In the process selection group, subjects are asked to choose either direct decision-making or sequential elimination as the process to make decisions.
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In the study, participants will be asked to make choices in economic decision problems. Participants will randomly be assigned into three treatment groups: sequential examination, sequential elimination, procedure selection. In the sequential examination group, subjects first examine each option and then directly choose their most preferred options in each decision problem. In the sequential elimination group, subjects have to sequentially eliminate their unpreferred options until all alternatives but one are eliminated. In the procedure selection group, subjects are asked to choose either sequential examination or sequential elimination as the procedure to make decisions.
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Secondary Outcomes (End Points)
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Our secondary outcomes include individuals' satisfaction with their choice and decision-making processes, choice frequencies, choice changes, awareness of mistake, first-order stochastic dominance, risk preference and elicited preference.
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Our secondary outcomes include individuals' satisfaction with their choice and decision-making procedures, choice frequencies, choice changes, awareness of mistake, first-order stochastic dominance and risk preference.
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Secondary Outcomes (Explanation)
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We measure individuals' satisfaction by survey questions after their completions of choice tasks. Participants simply provide their subjective evaluations of satisfaction with their choice and decision-making processes. We measure choice frequencies by computing the frequency of different choices in each menu in different treatment groups. We measure individuals' changes in choices by using an incentivized design. There are two blocks, A and B, each consists of the same 20 decision problems. Participants ex-ante do not know that Block A and B consist of the same decision problem before entering Block B. Depending on the treatments, in Block B, they are presented with their Block A choices (or sequence of eliminated alternatives) and can make different choices (or eliminate alternatives differently). In the end, they are asked to only one of Block A and Block B for payment. We count the number of choices that differ in Block A and Block B as a measure of awareness of "mistake" in making choices. We also check the violation first-order stochastic dominance in every menu. We will estimate risk-preference using the algorithm provided in Halevy, Persitz and Zrill (2018), We will elicit preference of each individual based on the method provided in Apesteguia and Ballester (2015).
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After
We measure individuals' satisfaction by survey questions after their completions of choice tasks. Participants simply provide their subjective evaluations of satisfaction with their choice and decision-making procedures. We measure choice frequencies by computing the frequency of different choices in each menu in different treatment groups. We measure individuals' changes in choices by using an incentivized design. There are two blocks, A and B, each consists of the same 21 decision problems. Participants ex-ante do not know that Block A and B consist of the same decision problem before entering Block B. Depending on the treatments, in Block B, they are presented with their Block A choices and can make different choices by applying again the same procedure as in Block A. In the end, they are asked to only one of Block A and Block B for payment. We count the number of choices that differ in Block A and Block B as a measure of awareness of "mistake" in making choices. We also check the violation first-order stochastic dominance in every menu. We will estimate risk-preference using the algorithm provided in Halevy, Persitz and Zrill (2018), We will elicit preference of each individual based on the method provided in Apesteguia and Ballester (2015).
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