On the Importance of Context in Sequential Decision-Making

Hsiao, Yu Chin and Kemp, Simon and Servátka, Maroš (2019): On the Importance of Context in Sequential Decision-Making.

Abstract

We experimentally investigate whether framing an individual-choice decision in a market setting results in a different outcome than when the decision is described in a context-free frame. We further explore whether the context effect is triggered by the frame itself or whether a richer descriptive content is required to establish familiarity with the decision-making environment. Understanding what constitutes context is central to formulating practical recommendations aiming to improve the quality of individual decisions. Our results show that framing a sequential search problem as selling houses leads to better decisions than a context-free frame. Manipulating whether or not the framed decision-making scenario includes a description of the house, which would be naturally available in a real estate market, does not impact the length of search or the total earnings.

• Item Type: MPRA Paper
• Language: English
• Keywords: Schema Activation, Secretary Problem, Sequential Search, Context, Framing, Decision-Making
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness

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