How Decision Makers Solve the Knapsack Problem: Insights from Experimental Studies

We address the question of how people behave in the context of Portfolio Decision Analysis problems. We set up an experimental study based on the knapsack problem to investigate human performance in project selection and to study the selection process. Our results demonstrate consistent sub optimization for all subjects under different treatments. Based on subjects’ final portfolio selection and portfolio development we identify decision heuristics which explain much of the observed behavior. The selection process of most subjects is consistent with a biased use of these heuristics.     «

We address the question of how people behave in the context of Portfolio Decision Analysis problems. We set up an experimental study based on the knapsack problem to investigate human performance in project selection and to study the selection process. Our results demonstrate consistent sub optimization for all subjects under different treatments. Based on subjects’ final portfolio selection and portfolio development we identify decision heuristics which explain much of the observed behavior. Th...     »