Age Effects and Heuristics in Decision Making

We examine in controlled experiments how individuals make choices when faced withmultiple options. The choice tasks mimic the selection of health insurance, prescriptiondrug, or retirement savings plans. However, in our experiment, the available options canbe objectively ranked. We ¯nd that the probability of a person selecting the optimaloption declines as the number of options increases, with the decline more pronouncedfor older subjects. Heuristics seem to di®er by age with older subjects relying moreon suboptimal decision rules. Behavior consistent with the estimated decision rules isobserved in an out-of-sample experiment....