Benjamin Enke, Harvard University

Quantifying Lottery Choice Complexity

Abstract

We develop quantitative indices of the objective and subjective complexity of lottery choice problems that can be applied to any standard dataset, and use them to study behavioral responses to complexity. First, we quantify problem complexity by studying which choice set features increase error rates and cognitive uncertainty in estimating expected values. Second, we deploy the complexity indices out-of-sample to explain variation in one million decisions across 11,000 experimental choice problems. In line with a model in which complexity affects the magnitude of cognitive noise, we find that complexity (i) makes choices substantially more noisy and regressive to people's prior; (ii) strongly predicts when people accept unattractive gambles and reject attractive ones; and (iii) spuriously generates behavior that looks like complexity aversion and small-stakes risk aversion. In structural estimations, allowing for complexity-dependent cognitive noise improves model fit substantially.


Benjamin Enke is an Associate Professor at Harvard's Department of Economics and a Faculty Research Fellow at the NBER

Benjamin Enke's research is in behavioral and experimental economics, cultural economics, and political economy. His work focuses on two lines of inquiry. First, he conducts experimental research to understand how the interplay of bounded rationality and complexity shapes economic decisions and beliefs. Secondly, he employs a combination of experimental and survey-based techniques to shed light on the economic and political relevance of heterogeneity in moral universalism (and cultural variation more generally).

He received his Ph.D. in 2016 from the University of Bonn and subsequently joined Harvard’s Economics Department. Since 2018, he also serves as Associate Editor at the Journal of the European Economic Association.

You can read more about Benjamin Enke here

CEBI contact: Johannes Wohlfart