ON THE ROLE OF PSYCHOLOGICAL VARIABLES IN DECISION MAKING
Miller, Austin M.
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This dissertation investigates the role of psychological variables in decision making, theoretically, experimentally, and empirically using retrospective behavior data. It includes the presentation of a more rigorous economic model of maximizing tendency, which is an individual psychological insight not currently considered in behavioral economics. It also encompasses the development of effective measures of psychological variables such as maximizing tendency and brand loyalty. The first chapter is one of the first evaluations of the effect of recreational marijuana legalization on marijuana use by college students. Legalization is likely to affect many types of costs to marijuana use, including lowering or eliminating the psychological costs associated with social stigma and an internal desire to be law abiding as well as other economic costs. Using survey data on retrospective substance use, this paper shows that students at Washington State University experienced a significant increase in both the probability of marijuana use and the frequency of marijuana use after legalization. The second chapter re-examines the relationship between the psychological construct of maximizing tendency and product brand loyalty. First, an economic sequential search theory is modified to include maximizing tendency. The model predicts an uncertain relationship between maximizing tendency and brand loyalty. The relationship is tested empirically in a lab setting and the study finds a positive relationship between maximizing tendency and brand loyalty when maximizing tendency is measured cleanly. The third chapter examines the effect of maximizing tendency on the role of choice complexity in decision making. In a lab setting, participants are presented with a series of hypothetical purchasing decisions that vary in complexity, in terms of the amount of information presented about product alternatives. The study finds that higher complexity increases apparent deliberation on a decision and decreases confidence. Maximization tendency is shown to mitigate these effects, with maximizers experiencing the similar effects of complexity but to a smaller extent. This mitigation, however, comes at the cost of higher decision difficulty even when complexity is low.