This paper is about satisficing behaviour. Rather tautologically, this is when decision-makers are satisfied with achieving some objective, rather than in obtaining the best outcome. The term was coined by Simon (Q J Econ 69:99–118, 1955), and has stimulated many discussions and theories. Prominent amongst these theories are models of incomplete preferences, models of behaviour under ambiguity, theories of rational inattention, and search theories. Most of these, however, seem to lack an answer to at least one of two key questions: when should the decision-maker (DM) satisfice; and how should the DM satisfice. In a sense, search models answer the latter question (in that the theory tells the DM when to stop searching), but not the former; moreover, usually the question as to whether any search at all is justified is left to a footnote. A recent paper by Manski (Theory Decis. doi:10.1007/s11238-017-9592-1, 2017) fills the gaps in the literature and answers the questions: when and how to satisfice? He achieves this by setting the decision problem in an ambiguous situation (so that probabilities do not exist, and many preference functionals can therefore not be applied) and by using the Minimax Regret criterion as the preference functional. The results are simple and intuitive. This paper reports on an experimental test of his theory. The results show that some of his propositions (those relating to the ‘how’) appear to be empirically valid while others (those relating to the ‘when’) are less so.

Increasingly, experimental economists, when eliciting risk preferences using a set of pairwise-choice problems (between two risky lotteries A and B), have given subjects a third choice (in addition to ‘I prefer A’ and ‘I prefer B’), namely that of saying, for example, ‘I am not sure about my preference’ or ‘I am not sure what to choose’. The implications for subjects of choosing this third option (which we call the ‘middle column’) vary across experiments depending upon the incentive structure. Some experiments provide no direct financial implications: what is ‘played out’ at the end of the experiment is not influenced by subjects choosing this middle column. In other experiments, if the middle column has been checked, then the payoff is determined by a randomisation of A and B. I report on an experiment, which adopts this latter incentive mechanism, and ask the question as to why people might choose this option, that is “why do they prefer randomisation?” I explore four distinct stories and compare their goodness-of-fit in explaining the data. My results show that the two of the four have the most empirical support. I conclude with a discussion of whether my results have anything to say about preference imprecision.

This paper analyzes household perceptions and the role of information in the fossil-fuel subsidy reforms (FFSR) in Indonesia. The data used in this study were c

Enhancing tax compliance are crucial for maintaining a robust and fair tax system. However, bureaucratic corruption is likely to deteriorate those efforts and morality, hence resulting in tax-abusive behaviour (tax avoidance and tax evasion). We present the experimental evidence on how developing tax morality is crucial to enhancing tax compliance. Specifically, we use progressive tax system, pre-filled form, audit scheme, and provide with tax rates of return (which proxies for the capability of the government’s tax management) to induce tax morale in the tax compliance experiment. We aim to find the impact of different formats of income reporting, tax rates of return, and the possibility of corruption on tax compliance under a progressive tax system. Our experimental design extends the tax compliance game with a real-effort game followed by income reporting in a group setting. A random audit is then used to check the declared income and imposing a penalty for the underreported income. We further advance this by introducing a pre-filled form and corruption in the experiment, where both are thought to have opposite impacts to each other. Nevertheless, using university student sample, our results show that both treatments increase the likelihood of tax evasion behaviour; a tendency to underreport the earnings from real-effort games. The impact is severe that the high tax rates of return – as a result of good tax management by the government – cannot persistently minimise this tendency of tax evasion behaviour. We discuss and conclude that enhancing tax compliance encompasses various factors such as trust in authorities, tax morale, tax composition and non-financial incentives; indicating if there is no ‘one size fits all’ intervention for this purpose.

Regional development bank (RDB) in Indonesia is financial institution in purpose to strengthen regional economy through financial inclusion. It is mandated on A