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  • LancasterWP2023_011

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Testing Models of Complexity Aversion

Research output: Working paper

Published
Publication date2/11/2023
Place of PublicationLancaster
PublisherLancaster University, Department of Economics
<mark>Original language</mark>English

Publication series

NameEconomics Working Papers Series

Abstract

In this paper we aim to investigate how the complexity of a decision-task may change an agents strategic behaviour as a result of increased cognitive fatigue. In this framework, complexity is defined as a function of the number of outcomes in a lottery. Using Bayesian inference techniques, we quantitatively specify and estimate adaptive toolbox models of cognition, which we rigorously test against popular expectation based models; modified to account for complexity aversion. We find that for the majority of the subjects, a toolbox model performs best both in-sample, and with regards to its predictive capacity out-of-sample, suggesting that individuals result to heuristics when the complexity of a task overwhelms their cognitive load.