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American Economic Review Vol. 108 No. 12 2018

Speed, Accuracy, and the Optimal Timing of Choices

Drew Fudenberg1; Philipp Strack2; Tomasz Strzalecki3

1 Department of Economics, MIT, 77 Massachusetts Avenue, Building E52-418, Cambridge MA 02139 (email: ) · 2 Department of Economics, University of California, Berkeley, Office 513 Evans Hall, Berkeley CA 94720 (email: ) · 3 Department of Economics, Harvard University, 1805 Cambridge Street, Cambridge MA 02138 (email: )

Abstract

We model the joint distribution of choice probabilities and decision times in binary decisions as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant cost per unit time for gathering information. We show that choices are more likely to be correct when the agent chooses to decide quickly, provided the agent’s prior beliefs are correct. This better matches the observed correlation between decision time and choice probability than does the classical drift-diffusion model (DDM), where the agent knows the utility difference between the choices.

DOI
10.1257/aer.20150742
Volume
108
Issue
12
Pages
3651-3684
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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