Reason-Based Choice: A Bargaining Rationale for the Attraction and Compromise Effects

53 Pages Posted: 8 Sep 2009

See all articles by Geoffroy de Clippel

Geoffroy de Clippel

Brown University - Department of Economics

Kfir Eliaz

Brown University

Date Written: August 2009

Abstract

This paper proposes a model of boundedly rational choice that explains the well known attraction and compromise effects. Choices in our model are interpreted as a cooperative solution to a bargaining problem among an individualÂ’s conflicting dual selves. We axiomatically characterize a unique bargaining solution that captures both effects when the selvesÂ’ preferences are known. We then provide a revealed preference foundation to our solution, and characterize the extent to which these two underlying preference relations can be uniquely identified.

Keywords: Attraction Effect, Bounded Rationality, Compromise Effect, Cooperative Bargaining, Fallback Bargaining, Reason-based-choice

JEL Classification: C71, C78, D03, D11

Suggested Citation

de Clippel, Geoffrey and Eliaz, Kfir, Reason-Based Choice: A Bargaining Rationale for the Attraction and Compromise Effects (August 2009). CEPR Discussion Paper No. DP7414. Available at SSRN: https://ssrn.com/abstract=1469913

Geoffrey De Clippel (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

Kfir Eliaz

Brown University ( email )

Economics Dept.
Box B
Providence, RI 02912
United States
401-863-2112 (Phone)
401-863-1970 (Fax)

HOME PAGE: http://www.econ.brown.edu/fac/Kfir_Eliaz/

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