Do Maximizers Predict

Better than Satisficers?

_______________
Kriti JAIN
J. Neil BEARDEN
Allan FILIPOWICZ
2011/18/DS/OB

Electronic copy available at: http://ssrn.com/abstract=1754927

 Do Maximizers Predict Better than Satisficers?

Kriti Jain *

J. Neil Bearden**

Allan Filipowicz***

This paper can be downloaded without charge from the Social Science Research Network electronic
library at: http://ssrn.com/abstract=1754927

* PhD Candidate in Decision Sciences at INSEAD 1, Ayer Rajah Avenue, Singapore 138676,
Singapore. Email: Kriti.jain@insead.edu
Corresponding a uthor.

** Assistant Professor of Decision Sciences at INSEAD 1, Ayer Raja h Avenue, Singapore

138676, Singapore. Email: neil.bearden@insead.edu

*** Assistant Professor of Organisational Behaviour at INSEAD 1, Ayer Rajah Ave nue,
Singapore 138676, Singapore. Email: allan.filipowicz@insead.edu

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Electronic copy available at: http://ssrn.com/abstract=1754927

 Abstract

We examined the relationship between maximizing (i.e. seeking the best)

versus satisficing (i.e.seeking the good enough) tendencies and forecasting
ability in a real-world prediction task: forecasting the outcomes of the 2010
FIFA World Cup. In Studies 1 and 2, participants gave probabilistic forecasts
for the outcomes of the tournament, and also completed a measure of
maximizing tendencies. We found that although maximizers expected
themselves to outperform others much more than satisficers, they actually
forecasted more poorly. Hence, on net, they were more overconfident. The
differences in forecasting abilities seem to be driven by the maximizers’
tendency to give more variable probability estimates. In Study 3, participants
played a betting task where they could select between safe and uncertain
gambles linked to World Cup outcomes. Again, maximizers did more poorly
and earned less, because of a higher variance in their responses. This
research contributes to the growing literature on maximizing tendencies by
expanding the range of objective outcomes over which maximizing has an
influence, and further showing that there may be substantial upside to being a
satisficer.

KEYWORDS: Maximizing; Satisficing; Forecasting; Predictions;

Overconfidence

Electronic copy available at: http://ssrn.com/abstract=1754927

 Maximizing vs. Satisficing and Accuracy

Do Maximizers Predict Better than Satisficers?

Simon (1955, 1993) proposed satisficing as a descriptive alternative to the normative

maximizing objective that guides the behavior of neo-classical agents. According to him, actual

people are more apt to search for something that is good enough (i.e., that satisfies by sufficing)

than they are to try to find the thing that is the absolute best (i.e., that maximizes). More

recently, Schwartz and colleagues argued that individuals varied stably in their tendency to

maximize vs. satisfice (Schwartz, Ward, Monterosso, Lyubomirsky, White, & Lehman, 2002),

with more recent literature examining how this individual difference leads to differences in

objective outcomes (Bruine de Bruin, Parker, & Fischhoff, 2007; Iyengar, Wells, & Schwartz,

2006; Polman, 2010). Following Simon’s original emphasis of satisficing involving choice

behavior, this empirical work on individual differences in satisficing tendencies has focused on

choice and decision behavior. In the current paper, we examine whether satisficing (versus

maximizing) tendencies are associated with judgment quality. In particular, we test whether

satisficers or maximizers do better in a forecasting task with true exogenous uncertainty:

predicting the outcomes of the 2010 FIFA World Cup.

Where one stands on the satisficing - maximizing continuum has an impact on decision

making outcomes. Maximizers report making more poor decisions based on a self-report

decision outcome inventory (Bruine de Bruin et al., 2007; Parker et al., 2007). Polman (2010)

found that maximizers simply seek and chose more alternatives, ending up with both better and

worse decisions than satisficers. The maximizers in Polman's study reported making worse

decisions, as assessed by Bruine de Bruin's (negative) Decision Outcome Inventory, but they also

reported making better decisions on a measure containing items relating to positive decisions.

And in an impressive demonstration of the objective benefits of maximizing, Iyengar et al.

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 Maximizing vs. Satisficing and Accuracy

(2006) found that graduating students who scored higher on Schwartz et al.’s (2002) maximizing

measure secured higher paying jobs than did lower scoring students.

While data is accumulating that maximizing tendencies influence decision making,

several researchers have asked about the breadth of behavior influenced by maximizing.

Schwartz noted that "it remains to be determined whether maximizers also consistently act

differently from satisficers" (2002, p. 1195), while Iyengar wondered whether maximizing

tendencies were global individual difference measures or "simply a set of learned behaviors or

search strategies designed specifically for decision-making tasks, and not necessarily even all

decision-making tasks" (2006, p. 148). We explore the breadth of impact of this individual

difference by looking at an important antecedent of decision making, probabilistic forecasting, as

well as a related judgment task, estimating one's relative performance on those probabilistic

forecasts.

Accurate probabilistic forecasting, the ability to correctly assign high probabilities to

events that will occur, and low probabilities to events that will not, is essential to effective

decision making. Consider the most proximal example, sports betting, an activity with millions

of participants (e.g. in the UK alone, the turnover from betting on the FIFA 2010 World Cup was

estimated to have been between 1 and 3 billion pounds). Obviously, successfully assessing odds

is crucial to good (long-term) performance. In a health context, a physician with highly

inaccurate assessments of outcome likelihoods would have difficulty recommending alternative

courses of treatment. And in an organizational context, correctly assessing the probability that

interest rates (or the stock market, or currency exchange rates, or even product demand) will

move in a certain direction, would allow one to adequately take advantage of and also protect

against such movement.

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 Maximizing vs. Satisficing and Accuracy

In contrast to the positive relationship between maximizing and decision making

outcomes (Iyengar et al., 2006; Polman, 2010), two preliminary findings hint that maximizers

might be worse at making accurate probabilistic forecasts. Bruine de Bruin and colleagues

(2007) argued that maximizers have worse decision making processes overall, based on

maximizers' lower scores on a seven-scale behavioral decision making competence inventory.

Most relevant to probabilistic forecasting, maximizers did worse on the consistency of risk

perceptions sub-scale. In this subscale, maximizers were more likely to assign higher

probabilities to events happening in the next year than to events happening in the next five years

(i.e. happening in the next year plus four other years), and assigning higher probabilities to

events in a subset (e.g. dying in a terrorist attack) than to events in the corresponding superset

(e.g. dying from any cause).

Second, and related to the lack of consistency of risk perceptions finding, maximizers

tend to show higher variance in responding (Polman, 2010). Polman showed that maximizers

alternated more between decks in the Iowa Gambling Task (Bechara et al., 1994), and that this

inflated response variability drove down their earnings, as their switching increased their

sampling from the “bad deck.” In making probabilistic forecasts, higher response variance that

is driven by superior discriminating skills, e.g. by a forecaster who can discriminate precisely

between teams that win their matches and those that do not, will not affect the accuracy of the

forecasts. All other sources of variance, for example variability driven by “needlessly

maximizing”, as Polman observed, would lead to worse forecasting accuracy.

In the studies described below, we examine whether maximizing tendencies are related to

the objective outcome of probabilistic forecasting accuracy, and test the effect of variance of

responding as a possible mechanism linking maximizing tendencies to forecasting accuracy.

5
 Maximizing vs. Satisficing and Accuracy

And since variance of responding driven by superior discriminating skills should not affect the

accuracy, we look both at overall response variability, and at the unnecessary variability left after

factoring out the variability that can arise from superior discriminating skills.

Given that we can measure how well participants did on the forecasting task, we are also

able to examine a related and well-documented judgment bias, people’s tendency to overestimate

their relative performance. In one classic demonstration, Svenson (1981) asked drivers to

estimate their driving abilities (relative to others in the experiment), and found that 93% of a US

sample and 69% of a Swedish sample put themselves in the top 50% of drivers. This pattern of

self-enhancing judgment has been observed across a range of tasks with a wide variety of

samples (e.g., Zuckerman and Jost, 2001), and has been dubbed the better-than-average effect

(Alicke et al., 1995).

Yet it remains an open empirical question whether maximizers would overestimate their

relative performance. Bruine de Bruin and colleagues' (2007) behavioral measure of decision

making competence included an underconfidence/overconfidence scale, which assessed

participants' abilities to recognize the extent of their knowledge. Maximizers were less aware of

the extent of their knowledge, but the scale does not allow one to adjudicate between

underconfidence (respondents do better than they thought) and overconfidence (respondents do

worse than they thought). Maximizers self-report less life satisfaction, optimism and self-esteem

and report more regret and depression (Schwartz et al., 2002), which suggests that they may bias

their self evaluations downward. However, since maximizers have highest standards for

themselves and prefer not to settle for second-best (see sample items from the maximizations

scale by Diab, Gillespie, and Highhouse, 2008, which we present below), it is also reasonable to

expect that they might bias their self evaluations upwards. But overconfidence is a combination

6
 Maximizing vs. Satisficing and Accuracy

of self-evaluation (how one thinks one did) and objective measures (how one actually did),

making the net effect indeterminate. With no a priori hypotheses, we carried out a pilot study to

test the relationship between maximizing and the better-than-average effect, before studying

overconfidence in the context of probabilistic forecasting.

We report below on this pilot study and three subsequent experiments. The pilot study

looked at the relationship between maximizing tendencies and the better-than-average effect.

Study One tested whether maximizing tendencies were associated with actual forecasting

performance, and the extent to which this relationship was driven by differences in response

variability. Given the results of the pilot study, we also examined the relationship between

maximizing tendencies and overconfidence. Study Two replicated Study One, but with a time

lag on the forecasting data, by using a second wave of predictions gathered 2 weeks later. In

Study Three we then examined whether maximizing tendencies were linked to outcomes in a

decision making (betting) task that implicitly required judgmental forecasts, and again tested the

mediating effect of response variability. Apart from the pilot study, all studies were conducted

just prior to or during the 2010 FIFA World Cup, and all of the forecasts and decisions were

linked to World Cup outcomes. Using tasks linked to real-world events with truly uncertain

outcomes allows us to better assess the degree to which maximizing might be linked to judgment

in uncertain economic settings – compared to general knowledge type tasks that involve only

epistemic uncertainty.

PILOT STUDY

To examine whether a relationship exists between maximizing tendencies and

overconfidence, we included a better-than-average type question and a measure of maximizing

7
 Maximizing vs. Satisficing and Accuracy

tendency as a filler task in another, unrelated study. Two-hundred subjects completed the

Maximizing Tendency Scale (Diab, Gillespie, and Highhouse, 2008), and also estimated the

percentage of participants completing the survey who would have driving skills inferior to their

own. In line with the results reported by Svenson (1981), 75% of the respondents placed

themselves above the median (50%) in driving ability. More importantly, their judgments of

relative driving skill were positively related to their score on the maximizing scale (r = 0.21, p <

0.01). In short, the maximizers showed a greater degree of better-than-average effect than did

satisficers in the pilot study, suggesting that we should also examine overconfidence in our

studies of probabilistic forecasting.

STUDIES 1 AND 2: WORLD CUP PREDICTION TASK

We will report the results from Studies 1 and 2 together. In both, subjects made

probabilistic forecasts for a number of outcomes of the 2010 FIFA World Cup. Study 1 was

conducted in the week prior to the start of the tournament, while Study 2 was conducted in the

roughly 1 day window between the Round of 16 and Quarter-finals. Both studies employed

incentive-compatible payoffs and standard experimental economics protocols (e.g., we did not

use any deception).

Method

Participants and Procedure

Eleven-hundred and ten subjects (906 males, 204 females), recruited from the INSEAD

and Singapore communities, took part in Study 1. Thirty-seven percent of these participants

reported that they would be betting on the World Cup results using real money. Each participant

was informed that five out of every 100 participants in the study would be selected at random

8
 Maximizing vs. Satisficing and Accuracy

and paid up to SGD 100 based on his or her own individual performance. The subjects in Study 2

were recruited from those who participated in Study 1. Four-hundred and thirty-seven subjects

took part in Study 2. The incentive scheme used in Study 2 was the same one used in Study 1,

except that one out of every 100 participants was selected at random for payment. In total, we

paid out nearly SGD 5000 (USD 3800) in performance-based incentives (including Study 3,

which we describe later).

Measures

Maximization Scale

We used Diab et al.’s (2008) nine item Maximizing Tendency Scale (hereafter MT) to

measure the maximizer construct. Diab et al. showed that the scale has a greater reliability and

internal consistency than the original scale developed by Schwartz et al. (2002). The MT items

are relatively straightforward and have very high face validity. Some representative items are:

− “No matter what I do, I have the highest standards for myself.”

− “I never settle for second best.”

− “I never settle.”

Respondents rated the items on a standard 5-point Likert-type scale (1 = strongly disagree

to 5 = strongly agree). Individual item ratings were then summed to create a single, scalar

composite score (M = 30.82; SD =5.29; α = 0.84). Higher values correspond to a greater

tendency to maximize.

World Cup Predictions

In the week prior to the tournament, each subject in Study 1 made forecasts for 20 of the

32 World Cup teams. The twenty teams were selected randomly and independently for each

subject. We used a subset of the 32 teams to keep the time required to complete the study

9
 Maximizing vs. Satisficing and Accuracy

manageable (around 40 minutes). For each of the 20 teams, the subject estimated the probability

of the team making it to each of the following five stages of the tournament:

1. Round of 16 (where 16 of the 32 teams remain)

2. Quarter-Finals (where 8 of the 32 teams remain)

3. Semi-Finals (where 4 of the 32 teams remain)

4. Finals (where 2 of the 32 teams remain)

5. Overall Winner (where 1 of the 32 teams remain)

Study 2 was run just after the Round of 16 and prior to the first Quarter-Finals match. In

it, each subject gave four probabilistic forecasts for each of the remaining 16 teams: the chances

of the teams making it to the Quarter-Finals, Semi-Finals, Finals, and of winning the tournament.

In both studies, the subjects expressed their judgments by selecting one of ten response

categories: 0-10%, 11-20%, …, 91-100%. For each of the two studies separately, subjects also

estimated the percentage of participants they would perform better than in the forecasting task

(we call this Estimated Standing). This question was asked after the subjects had made all of

their team forecasts.

Performance Measures

Using the forecast probabilities, we computed Brier scores as well as its two components,

calibration and resolution, for each subject (Brier, 1950; Murphy, 1973). We used the mid-point

of the selected probability interval to compute the scores. For instance, for the 0-10% interval,

we used 5%; for the 11-20% interval, we used 15%; and so on. Higher Brier scores indicate

poorer accuracy, and higher calibration scores indicate poorer calibration. Higher resolution

scores, on the other hand, indicate greater (better) resolution. The overall Brier score will serve

10
 Maximizing vs. Satisficing and Accuracy

as our primary performance measure. The scheme under which the subjects gave their estimates

was based on the Brier score and was therefore incentive-compatible (Winkler, 1969).

We computed an overconfidence measure based on the difference between estimated

relative performance (Estimated Standing) and actual relative performance (Actual Standing).

For example, if a subject estimated that he would do better than 85% of the forecasters and he

actually did better than only 30%, then his score would be 85 – 30 = 55. For shorthand, we will

refer to this measure as OC.

We also measured how the subjects used the response scale, that is, how they assigned

probabilities. In particular, we wanted to measure the degree of variance in the assigned

probabilities. Based on the results from Polman (2010), we conjectured that the maximizers’

probabilities would have greater variance. We therefore computed a composite measure of

response variability for each subject. Since the average assigned probabilities tend to decrease

with the rounds of the tournament (as there are fewer and fewer slots left at later stages), for each

subject we computed the variance in assigned probabilities separately for each round (since the

grand mean would not be representative across rounds). We then averaged these variances across

rounds to form a single measure of response variance for each subject. We will denote the

composite measure by VAR.

Results

Tables 1 and 2 shows zero-order correlations between maximizing tendency (MT), Brier

score, calibration score, resolution score, estimated standing, actual standing, overconfidence

(estimated standing – actual standing), and VAR. The results demonstrate that MT had a

significant positive correlation with both the Brier score (Study 1: r =0.08, p < 0.01; Study 2: r =

0.12, p < 0.05) and the calibration score (Study 1: r = 0.10, p < 0.001; Study 2: r = 0.14, p <

11
 Maximizing vs. Satisficing and Accuracy

0.001), but no significant relationship with the resolution score. Put differently, people who

scored higher on MT made poorer predictions. For ease of visualization, we compare the bottom

20% of scorers on the MT scale (MT ≤ 27) with the top 20% of scorers (MT ≥ 35), and refer to

the two groups as satisficers and maximizers, respectively. Figure 1 shows the calibration curves

for the two groups in Studies 1(top panel) and 2 (bottom panel). Notice that for both groups, the

subjective estimates were less than the objective relative frequency – indicating miscalibration

for most of the range – but that the degree of miscalibration was greater for the maximizers in

both studies.

Overall, people significantly overestimated their relative performance in both Study 1

(OC: M = 12.13, SD = 33.18, t(1105) = 12.16, p < 0.001), and Study 2 (OC: M = 10.26, SD =

34.37, t(436) = 6.24, p < 0.001). And MT was significantly correlated with OC in both studies

(Study 1: r = 0.18, p < 0.001; Study 2: r = 0.17, p < 0.001). Put differently, higher MT scorers

were more overconfident about their relative performance. The observed relationship between

OC and MT can be better appreciated by examining the relationship between MT and the two

component parts of the OC score: MT is positively correlated with estimated standing (Study 1: r

= 0.17, p < 0.001; Study 2: r = 0.10, p < 0.05), but negatively related to actual standing (Study 1:

r = -0.09, p < 0.01; Study 2: r = -0.14, p < 0.01). Higher MT scorers thought they would perform

better, but in fact performed worse.

To get a better handle on what might be driving the observed differences in forecasting

performance, we looked at the relationship between response variability (measured by VAR) and

performance. As anticipated, there is a significant positive correlation between MT and VAR in

both studies (Study1: r = 0.19, p < 0.001; Study 2: r = 0.16, p < 0.001). To make clear the

strength of the relationship between MT and VAR, the line chart in Figure 2 show the average

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 Maximizing vs. Satisficing and Accuracy

VAR by MT for each study. The bars in the figures represent the proportion of subjects in the

respective bin with an above median VAR (taken over all values of MT). Clearly, participants

with a higher maximizing tendency also had more variable probability estimates.

Mediation Analysis

Next, we examine whether the observed relationship between maximizing tendency and

performance (Brier score) is mediated by the tendency to have more or less variable probability

estimates (VAR). Figure 3 shows the hypothesized mediation.

For Study 1, all three of Baron and Kenny’s (1986) preconditions for mediation were

met. The predictor (MT) predicts the outcome (Brier score) (β = .08, p < 0.01, R2 = .01). The

predictor (MT) predicts the mediator (VAR) (β = 0.19, p < 0.001, R2 = 0.03). And when both MT

and VAR are included, the coefficient on MT becomes non-significant (β = 0.01, p = 0.67) but

the coefficient on VAR remains significant (β = 0.38, p < 0.001). Hence, VAR fully mediates

the effect of MT on the Brier score (Sobel’s z = 5.63, p < 0.01).

Similarly, for Study 2, all three of Baron and Kenny’s (1986) preconditions for mediation

were met. The predictor (MT) predicts the outcome (Brier score) (β = 0.12, p < 0.01, R2 = 0.01).

The predictor (MT) predicts the mediator (VAR) (β = 0.16, p < 0.01, R2 = 0.02). And when both

MT and VAR are included, the coefficient on MT becomes non-significant (β = 0.05, p = 0.22),

while the coefficient on VAR is still significant (β = 0.43, p < 0.001). Again, there is full

mediation (Sobel’s z =3.21, p < 0.01).

Robustness Check

An alternative measure of response variability. It is easy to show that having high

response variability is not necessarily bad for performance. In fact, a forecaster who can

discriminate precisely between teams that win their matches from those that do not would have

13
 Maximizing vs. Satisficing and Accuracy

accurate forecasts and also have a high VAR. However, our results in Tables 1 and 2 show that

maximizers had a higher VAR but no better resolution scores (a measure of discrimination). For

robustness, we computed another measure of response variability related to discrimination, a

measure of excess “scatter” in the probabilities from the Yates’ (1982) decomposition of the

Brier score (see also Yates and Curley, 1985). This measure is the weighted average of the

conditional variances of the probabilities given wins and given loses. It can be thought of as the

unnecessary variability left after factoring out the variability that can arise from superior

discriminating skills. Therefore a higher score on this measure necessarily implies worse overall

performance (i.e. a high Brier score). In both studies, MT had a significant positive correlation

with this scatter score (Study 1: r = 0.15, p < 0.01; Study 2: r = 0.15, p < 0.01). Therefore, also

with this alternative measure, maximizers showed higher response variability.

Using scatter score as a measure of variability, we tested whether the maximizer-

performance relationship was mediated by the higher response variability. Again the three Baron

and Kenny (1986) preconditions were satisfied. The predictor (MT) predicts the outcome (Brier

Score) (Study 1: β = 0.08, p = 0.01, R2 = 0.01; Study 2: β = 0.12, p = 0.01, R2 = 0.01). The

predictor (MT) predicts the mediator (scatter score) (Study 1: β = 0.15, p < 0.001, R2 = .02;

Study 2: β = .15, p = 0.01, R2 = 0.02). And when both MT and scatter score are included,

coefficient of MT becomes non-significant (Study 1: β = -0.01, p = 0.75; Study 2: β = 0.02, p =

0.53) and the coefficient of scatter score remains significant (Study 1: β =0.59, p < 0.01; Study 2:

β = 0.63, p < 0.01). Therefore, we find that the scatter score mediated the MT-Brier score in

both Study 1 (Sobel’s z = 5.13, p < 0.001) and Study 2 (Sobel’s z = 3.16, p < 0.01). Hence, again

the higher response variability seems to be playing a role in the MT-Brier Score relationship:

14
 Maximizing vs. Satisficing and Accuracy

Individuals with higher MT scores tend to show larger response variability, and this effect drives

their poorer forecasting performance.

Discussion

Both Studies 1 and 2 unambiguously show that maximizing tendencies are linked to

poorer prediction performance in the World Cup forecasting task. The performance differences

associated with maximizing tendencies are fully mediated by response variability. Once we

control for variability in responding (which is greater among the maximizers), the performance

difference vanishes. Further, we also found strong evidence for increased overconfidence among

maximizers: The maximizers predicted they would do relatively better, but in fact they did

relatively worse. Next, we test whether the observed differences in forecasting performance

affect outcomes in a betting (decision) task.

STUDY 3: WORLD CUP BETTING TASK

Studies 1 and 2 show that maximizers performed more poorly than satisficers on a

probabilistic forecasting task. Here, we examine whether there are concomitant differences in

performance on a decision (betting) task. In the betting task, subjects must choose between

uncertain gambles whose payoffs are linked to World Cup outcomes.

Method

Participants and Procedure

Subjects who took part in Study 1 were invited again to take part in a betting task two

days prior to the start of the first World Cup match. Five-hundred and eleven subjects agreed to

take part. As in Studies 1 and 2, we used incentive-compatible payoffs: we selected one out of

15
 Maximizing vs. Satisficing and Accuracy

every 100 subjects at random and paid them according to their actual betting decisions and

outcomes. We paid a total of SGD 150 to a total of five participants.

Measures

World Cup Betting Task

We used a modification of the Holt-Laury (Holt and Laury, 2002) risky choice task to

measure decision making under uncertainty. For each of the 32 World Cup teams, the subjects

were shown a series of lotteries consisting of a safe and an uncertain option. The safe option

offered a sure-thing payoff, and the uncertain option always paid off $100 if and only if the team

made it to the Round of 16. Ten gambles were shown for each team, with sure-thing payoffs

starting at $10 and increasing in units of $10 (up to a $100 sure-thing payoff). An example using

France is displayed in Appendix A. Note that a subject should be more likely to take the

uncertain option as her subjective probability of the team advancing to the Round of 16

increases.

Risk Preferences

One can also suppose that risk attitudes should play a role in the subjects’ choices

between the risky and uncertain options. Hence, we also gave the subjects the standard Holt and

Laury (2002) risky choice task in order to assess their general risk preferences. The task consists

of a series of pairs of risky options in which the subject must choose one option from each pair.

The pairs we used are displayed in Appendix B. Notice that the spread of the payoffs for the A

options ($40 versus $32) is smaller than the spread of payoffs for the B options ($77 versus $2).

Except for the extreme cases where the outcomes are no longer uncertain, the variance of the

payoffs for B is greater than the variance for A. A more risk averse person will tend to prefer

more of the A options relative to a less risk averse person. Hence, our measure of risk aversion –

16
 Maximizing vs. Satisficing and Accuracy

following Holt and Laury (2002) – is simply the number of A options selected by the subject.

(The Holt-Laury risk measure will be useful below when we examine the relationship between

maximizing tendency and average earnings.)

Performance Measures

We computed the average earnings (henceforth referred to as earnings) for each subject

based on his bet choices over all 32 teams. In addition, we computed an analogue of the VAR

measure used in Studies 1 and 2. For each of the 32 teams, we calculated the number of risky

choices. The variance of the number of risky choices is our measure of response variability, and

we refer to it as VAR. Note that, computed this way, VAR in Study 3 is entirely analogous to the

VAR measure used for probability estimates in Studies 1 and 2.

Results and Discussion

Table 3 shows the correlations of earnings and VAR from Study 3 with maximizing

tendency (MT), risk aversion (from the Holt-Laury task); and it also has the correlations between

the Study 3 measures and the Brier scores and VAR from Studies 1 and 2. (Note the strong

correlation between Brier scores across rounds.) Forecasting performance from Studies 1 and 2 is

indeed linked to earnings in Study 3: earnings were negatively correlated with Brier scores

(Study1: r = -0.14, p = 0.001; Study 2: r = -0.22, p < 0.001). Further, earnings were negatively

correlated with MT (r = -0.13, p < 0.01). Maximizers earned less in the betting task. For

visualization, in Figure 4, we show the cumulative distributions of earnings for the top 20% of

the scorers on the MT scale (maximizers) and the bottom 20% of the scorers (satisficers). The

difference between the groups is stark: in fact, the distribution of earnings for the satisficers first-

order stochastically dominates the distribution of earnings for the maximizers.

17
 Maximizing vs. Satisficing and Accuracy

Again, maximizers had a higher response variability, i.e. VAR was positively correlated

with MT (r = 0.23, p < 0.01). Also note the strong correlations between the VAR scores across

all three studies. As in Studies 1 and 2, we examined whether VAR mediated the maximizing-

performance relationship. Importantly, since earnings are correlated with risk aversion (see Table

3), we must control for risk aversion in the analyses of the betting results. We first regressed

earnings onto MT while controlling for risk aversion, and found a significant negative

relationship between MT and earnings (β = -0.13, p < 0.01, see Model 1 in Table 4). That is,

even after accounting for differences in risk preferences, we find that maximizing is negatively

related to earnings. Next, we ran another model with MT, the risk aversion measure, and also

VAR as independent variables, and earnings as the dependent variable (Model 2, Table 4). With

VAR in the model, the coefficient on MT becomes non-significant (β = -0.03, p = 0.44), while

the coefficient on VAR is significant (β = -0.42, p < 0.01). Again, we find that controlling for the

variability in responding – which is greater among the maximizers – causes the relationship

between maximizing tendency and earnings to go away.

Robustness Check

As in Studies 1 and 2, we also calculated the scatter score, by taking the weighted

average of the conditional variances of the number of risky choices given wins and given loses.

As predicted, this scatter score was significantly positively correlated with MT (r = 0.24, p <

0.01) and negatively correlated with earnings (r = -0.54, p < 0.01). Next, we examined whether

scatter score mediated the maximizing-performance relationship. This time, we ran a regression

with MT, the risk aversion measure, and scatter score as independent variables, and earnings as

the dependent variable (Model 3, Table 4). Again, the coefficient on MT becomes non-

significant (β = -0.00, p = 0.93), while the coefficient on scatter score is significant (β = -0.54, p

18
 Maximizing vs. Satisficing and Accuracy

< 0.01). Therefore, we find that this alternative measure of response variability again mediates

the relationship between maximizing tendency and earnings.

GENERAL DISCUSSION

We have shown that individuals who score higher on a self-report measure of

maximizing tended to perform more poorly in forecasting the outcomes of the 2010 FIFA World

Cup (Studies 1 and 2) and also to earn less in a betting task related to the World Cup outcomes

(Study 3). Further, maximizers tended to overestimate their relative forecasting performance to a

greater extent than did satisficers (Studies 1 and 2). Importantly, these tasks have many features

in common with problems faced by people in genuine economic settings, the type of settings that

motivated Simon’s critique of the maximizing objective of neo-classical economics. Most

notably, the World Cup forecasting problems involve tremendous genuine aleatory uncertainty –

the kind that one finds in asset markets, currency markets, and so on. Glaser and Weber (2007)

found that investors who believe themselves above average in terms of investment acumen tend

to trade more frequently, and higher volume trading often tends to reduce returns due to the

increased transaction costs (see, e.g., Barber and Odean, 2002; Odean, 1998). Hence, with some

irony, there is reason to anticipate that maximizers might do less well in some economic settings.

Across three studies, we also showed that the negative relationship between maximizing

tendencies and both forecasting performance and decision making outcomes on a betting task

was driven by differences in response variability. Maximizers had a greater response variability

– their probability judgments were more dispersed over the [0, 1] interval – and that led to poorer

performance. This is analogous to Polman's (2010) finding, discussed earlier, that maximizers

alternated more frequently in the Iowa Gambling Task and in doing so negatively affected their

average earnings. It seems reasonable to conjecture that in settings like these (including ours)

19
 Maximizing vs. Satisficing and Accuracy

that involve judgments about exogenous uncertainty, maximizers’ pursuit for the elusive “best”

causes them tremendous anxiety and worriment and this then gets manifested in their higher

response variability. Future research could test this emotional proximal cause of maximizers’

response variability.

Our findings expand the range of objective outcomes over which maximizing tendencies

have an influence. While prior research has focused on decisions making and maximizers'

subjective reactions to those decisions, we have shown that maximizing tendencies also

influence an important antecedent to decision making, probabilistic forecasting, and a related

subjective appraisal, overconfidence. We have also started to examine a potential mechanism

through which maximizing tendencies hamper forecasting accuracy, increased response

variability. In answering Schwartz's query of whether maximizing tendencies make a difference,

we can more confidently say yes, in more ways than one could imagine.

20
 Maximizing vs. Satisficing and Accuracy

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Yates, J. F. & Curley, S. P. (1985). Conditional distribution analyses of probability forecasts.

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 Maximizing vs. Satisficing and Accuracy

TABLE 1

Correlation from World Cup Predictions in Study 1

Maximizing Brier Calibration Resolution Estimated Actual Overcon Response Mean

Tendency Score Standing Standing fidence Variance (Standard
(MT) (OC) (VAR) Deviation)
Maximizing Tendency (MT) 1 30.82 (5.29)
Brier Score 0.08** 1 0.13 (0.03)
Calibration 0.10** 0.80** 1 0.03 (0.03)
Resolution -0.01 -0.46** -0.28** 1 0.06 (0.02)
Estimated Standing 0.17** -0.07* 0.03 0.20** 1 62.11 (19.72)
Actual Standing -0.09** -0.89** -0.61** 0.43** 0.11** 1 49.98 (28.86)
Overconfidence (OC) 0.18** 0.74** 0.55** -0.26** 0.50** -0.81** 1 12.13 (33.18)
Response Variance (VAR) 0.19** 0.38** 0.45** 0.07* 0.22** -0.37** 0.45** 1 0.05 (0.03)
**p<.01, *p<.05

24
 Maximizing vs. Satisficing and Accuracy

TABLE 2

Correlation from World Cup Predictions in Study 2

Maximizing Brier Calibration Resolution Estimated Actual Overcon Response Mean

Tendency Score Standing Standing fidence Variance (Standard
(MT) (OC) (VAR) Deviation)
Maximizing Tendency (MT) 1 30.82 (5.29)
Brier Score 0.12* 1 0.16 (0.04)
Calibration 0.14** 0.88** 1 0.04 (0.03)
Resolution -0.03 -0.67** -0.25** 1 0.06 (0.02)
Estimated Standing 0.10* -0.02 0.07 0.15** 1 60.26 (19.46)
Actual Standing -0.14** -0.89** -0.72** 0.70** 0.03 1 50.00 (28.87)
Overconfidence (OC) 0.17** 0.74** 0.65** -0.50** 0.54** -0.82** 1 10.26 (34.37)
Response Variance (VAR) 0.16** 0.44** 0.54** -0.05 0.28** -0.46** 0.54** 1 0.05 (0.03)
**p<.01, *p<.05

25
 Maximizing vs. Satisficing and Accuracy

TABLE 3

Correlation from Betting Task in Study 3

Study 3 Maximizing Risk Study 1 Study 2 Study 3 Study 1 Study 2 Mean

Average Tendency Aversion Brier score Brier score VAR VAR VAR (Standard
Earnings (MT) deviation)
Study 3 Average Earnings 1 650.99 (4.99)
Maximizing Tendency (MT) -0.13** 1 30.82 (5.29)
Risk Aversion -0.12** -0.01 1 5.26 (2.00)
Study 1 Brier score -0.14** 0..08** 0.08 1 0.13 (0.03)
Study 2 Brier score -0.22** 0.12* 0.05 0.52** 1 0.16 (0.04)
Study 3 VAR -0.43** 0.23** 0.02 0.18** 0.24** 1 8.88 (5.19)
Study 1 VAR -0.12** 0.19** -0.03 0.38** 0.23** 0.40** 1 0.05 (0.03)
Study 2 VAR -0.16** 0.16** 0.02 0.23** 0.44** 0.43** 0.52** 1 0.05 (0.03)
**p<.01

26
 Maximizing vs. Satisficing and Accuracy

TABLE 4

Regression of Average Earnings on maximizing tendency

Dependent Variable Average Earnings Average Earnings Average Earnings

(Model 1) (Model 2) (Model 3)
Maximizing Tendency (MT) -0.13** -0.03 -0.00
Risk Aversion -0.13** -0.12** -0.11**
Variance (VAR) -0.42**
Scatter score -0.54**
F-statistic 8.53** 42.70** 73.67**
(df) (2,508) (3,507) (3,507)
2
Adjusted R 0.03 0.20 0.30
**p<.01

27
 Maximizing vs. Satisficing and Accuracy

FIGURE 1

Calibration Curves for Maximizers and Satisficers in Study 1 (top panel) and Study 2 (bottom
panel). Note: 45 degree line shows perfect calibration

100%

80%
Percentage true

60%

40%

20%

0%
0 20 40 60 80 100

Subjective probability

Satisficers Maximizers

100%
90%
80%
70%
Percentage true

60%
50%
40%
30%
20%
10%
0%
0 20 40 60 80 100

Subjective Probability (%)

Satisficers Maximizers

28
 Maximizing vs. Satisficing and Accuracy

FIGURE 2

Average VAR (line chart) and Percentage of respondents with VAR > median VAR (bar
chart) across various maximizing score categories in Study 1 (top panel) and Study 2 (bottom
panel)

0.08 100%

Percentage of participants with VAR >

0.07 90%
80%
0.06
Average VAR (line)

median VAR (bars)

70%
0.05 60%
0.04 50%

0.03 40%
30%
0.02
20%
0.01 10%
0.00 0%
<=25 26-30 31-35 36-40 >40

Maximizing tendency

0.08 100%
>
0.07 90% R
A
V
80% h
0.06 ti
) 70% w )s
e ra
n
il st
( 0.05 60% n (b
R a R
A ip
ci A
V 0.04 50% tr V
e
ga a n
r 40% p ia
e 0.03 f d
v o e
A 30% e
ga m
0.02 t
20% n
e
cr
0.01 10% e
P
0.00 0%
<=25 26-30 31-35 36-40 >40

Maximizing tendency

29
 Maximizing vs. Satisficing and Accuracy

FIGURE 3

VAR mediated the effect of maximizing tendency on Brier score in Study 1 (top panel) and

Study 2 (bottom panel)

0.08** (0.01)
Maximizing tendency (MT) Brier score (BS)

0.19** 0.38**
Response
Variance (VAR)

0.12** (.05)
Maximizing tendency (MT) Brier score (BS)

0.16** 0.44**
Response
Variance (VAR)

30
 Maximizing vs. Satisficing and Accuracy

FIGURE 4

Cumulative Distribution of Average Earnings for Maximizers and Satisficers in Study 3

1
Probability (Average Earnings < X) 0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
350 450 550 650 750

Satisficers Maximizers

31
 Maximizing vs. Satisficing and Accuracy

APPENDIX A: Betting Task in Study 3

Option A Option B
$10 for sure $100 if France makes it to the Round of 16.
$20 for sure $100 if France makes it to the Round of 16.
$30 for sure $100 if France makes it to the Round of 16.
$40 for sure $100 if France makes it to the Round of 16.
$50 for sure $100 if France makes it to the Round of 16.
$60 for sure $100 if France makes it to the Round of 16.
$70 for sure $100 if France makes it to the Round of 16.
$80 for sure $100 if France makes it to the Round of 16.
$90 for sure $100 if France makes it to the Round of 16.
$100 for sure $100 if France makes it to the Round of 16.

32

APPENDIX B: Holt-Laury Task for Risk Preferences
Option A
10% for $40 or a 90% chance for $32
20% for $40 or a 80% chance for $32
30% for $40 or a 70% chance for $32
40% for $40 or a 60% chance for $32
50% for $40 or a 50% chance for $32
60% for $40 or a 40% chance for $32
70% for $40 or a 30% chance for $32
80% for $40 or a 20% chance for $32
90% for $40 or a 10% chance for $32
100% for $40 or a 0% chance for $32
Maximizing vs. Satisficing and Accuracy
Option B
10% chance for $77 or a 90% chance for $2
20% chance for $77 or a 80% chance for $2
30% chance for $77 or a 70% chance for $2
40% chance for $77 or a 60% chance for $2
50% chance for $77 or a 50% chance for $2
60% chance for $77 or a 40% chance for $2
70% chance for $77 or a 30% chance for $2
80% chance for $77 or a 20% chance for $2
90% chance for $77 or a 10% chance for $2
100% chance for $77 or a 0% chance for $2
33