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On Preference for Flexibility and Complexity Aversion: Experimental Evidence1

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Abstract

Desire for flexibility suggests that the value of a choice-menu should increase with the number of options included. Complexity-aversion on the other hand may imply that the value of a menu decreases with its cardinality. We present the results of an experiment where 5 groups of subjects were asked to evaluate saving plans that let the investor choose between alternative indexing-schemes before the saving period ends. The complexity of the different plans was manipulated in two ways: (1) increasing the number of indexing options; (2) reducing the quality of information upon which the choice between different indices is made. We show that an increase in the number of indexing-options produces a negative complexity effect when the quality of information is high. The same change however results in a positive flexibility effect when the quality of information is low. More generally our results suggest a `negative cross interaction of complexity effects' and that the impact of complexity is marginally decreasing. We discuss possible cognitive explanations to the observed evaluation-patterns.

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Authors and Affiliations

  1. Faculty of Industrial Engineering and Management, Technion, Israel Institute of Technology, 32000, Haifa, Israel

    Doron Sonsino & Marvin Mandelbaum

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  1. Doron Sonsino
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  2. Marvin Mandelbaum
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Correspondence to Doron Sonsino.

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Sonsino, D., Mandelbaum, M. On Preference for Flexibility and Complexity Aversion: Experimental Evidence1 . Theory and Decision 51, 197–216 (2001). https://doi.org/10.1023/A:1015555026870

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  • DOI: https://doi.org/10.1023/A:1015555026870

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