Article ID: | iaor2006676 |
Country: | Germany |
Volume: | 58 |
Issue: | 3 |
Start Page Number: | 283 |
End Page Number: | 304 |
Publication Date: | May 2005 |
Journal: | Theory and Decision |
Authors: | Chang Juin-Jen, Lu Huei-Chung, Chen Mingshen |
While the traditional economic wisdom believes that an individual will become better off by being given a larger opportunity set to choose from, in this paper we question this belief and build a formal theoretical model that introduces decision costs into the rational decision process. We show, under some reasonable conditions, that a larger feasible set may actually lower an individual's level of satisfaction. This provides a solid economic underpinning for the Simon prediction.