An optimal sequential information acquisition model subject to a heuristic assimilation constraint
Purpose: The purpose of this paper is to study the optimal sequential information acquisition process of a rational decision maker (DM) when allowed to acquire n pieces of information from a set of bi-dimensional products whose characteristics vary in a continuum set.
Design/methodology/approach: The authors incorporate a heuristic mechanism that makes the n-observation scenario faced by a DM tractable. This heuristic allows the DM to assimilate substantial amounts of information and define an acquisition strategy within a coherent analytical framework. Numerical simulations are introduced to illustrate the main results obtained.
Findings: The information acquisition behavior modeled in this paper corresponds to that of a perfectly rational DM, i.e. endowed with complete and transitive preferences, whose objective is to choose optimally among the products available subject to a heuristic assimilation constraint. The current paper opens the way for additional research on heuristic information acquisition and choice processes when considered from a satisficing perspective that accounts for cognitive limits in the information processing capacities of DMs.
Originality/value: The proposed information acquisition algorithm does not allow for the use of standard dynamic programming techniques. That is, after each observation is gathered, a rational DM must modify his information acquisition strategy and recalculate his or her expected payoffs in terms of the observations already acquired and the information still to be gathered.
Di Caprio, Debora; Santos-Arteaga, Francisco J.; and Tavana, Madjid, "An optimal sequential information acquisition model subject to a heuristic assimilation constraint" (2016). Business Systems and Analytics Faculty Work. 160.