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Reason-based choice: a bargaining rationale for the attraction and compromise effects

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  • de Clippel, Geoffroy

    ()
    (Department of Economics, Brown University)

  • Eliaz, Kfir

    ()
    (Department of Economics, Brown University)

Abstract

Among the most important and robust violations of rationality are the attraction and the compromise effects. The compromise effect refers to the tendency of individuals to choose an intermediate option in a choice set, while the attraction effect refers to the tendency to choose an option that dominates some other options in the choice set. This paper argues that both effects may result from an individual's attempt to overcome the difficulty of making a choice in the absence of a single criterion for ranking the options. Moreover, we propose to view the resolution of this choice problem as a cooperative solution to an intra-personal bargaining problem among different selves of an individual, where each self represents a different criterion for choosing. We first identify a set of properties that characterize those choice correspondences that coincide with our bargaining solution, for some pair of preference relations. Second, we provide a revealed-preference foundation to our bargaining solution and characterize the extent to which these two preference relations can be uniquely identified. Alternatively, our analysis may be reinterpreted as a study of (inter-personal) bilateral bargaining over a finite set of options. In that case, our results provide a new characterization, as well as testable implications, of an ordinal bargaining solution that has been previously discussed in the literature under the various names of fallback bargaining, unanimity compromise, Rawlsian arbitration rule and Kant-Rawls social compromise.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 7 (2012)
Issue (Month): 1 (January)
Pages:

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Handle: RePEc:the:publsh:798

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Keywords: Behavioral economics; attraction and compromise effects; bargaining;

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References

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  1. Nejat Anbarci, 2006. "Finite Alternating-Move Arbitration Schemes and the Equal Area Solution," Theory and Decision, Springer, vol. 61(1), pages 21-50, 08.
  2. Eliaz, Kfir & Spiegler, Ran, 2004. "Contracting with Diversely Naive Agents," CEPR Discussion Papers 4573, C.E.P.R. Discussion Papers.
  3. repec:bla:restud:v:73:y:2006:i:3:p:689-714 is not listed on IDEAS
  4. Anbarci, Nejat, 1993. "Noncooperative Foundations of the Area Monotonic Solutions," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 245-58, February.
  5. Pierre-André Chiappori & Olivier Donni, 2006. "Learning from a Piece of Pie: the Empirical Content of Nash Bargaining," Cahiers de recherche 0619, CIRPEE.
  6. Gil Kalai & Ariel Rubinstein & Ran Spiegler, 2002. "Rationalizing Choice Functions By Multiple Rationales," Econometrica, Econometric Society, vol. 70(6), pages 2481-2488, November.
  7. Green, Jerry & Hojman, Daniel, 2007. "Choice, Rationality and Welfare Measurement," Working Paper Series rwp07-054, Harvard University, John F. Kennedy School of Government.
  8. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
  9. Attila Ambrus & Kareen Rozen, 2012. "Rationalizing Choice with Multi-Self Models," Working Papers 12-11, Duke University, Department of Economics.
  10. Chambers, Christopher P. & Echenique, Federico, 2008. "The core matchings of markets with transfers," Working Papers 1298, California Institute of Technology, Division of the Humanities and Social Sciences.
  11. Lombardi, Michele, 2009. "Reason-based choice correspondences," Mathematical Social Sciences, Elsevier, vol. 57(1), pages 58-66, January.
  12. Kfir Eliaz & Michael Richter & Ariel Rubinstein, 2011. "Choosing the two finalists," Economic Theory, Springer, vol. 46(2), pages 211-219, February.
  13. Özgür Kıbrıs & Murat Sertel, 2007. "Bargaining over a finite set of alternatives," Social Choice and Welfare, Springer, vol. 28(3), pages 421-437, April.
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Cited by:
  1. Echenique, Federico & Chambers, Christopher P., 2014. "On the consistency of data with bargaining theories," Theoretical Economics, Econometric Society, vol. 9(1), January.
  2. Georgios, Gerasimou, 2013. "A Behavioural Model of Choice in the Presence of Decision Conflict," SIRE Discussion Papers 2013-25, Scottish Institute for Research in Economics (SIRE).
  3. Geoffroy de Clippel & Camelia Bejan, 2009. "No Profitable Decomposition in Quasi-Linear Allocation Problems," Working Papers 2009-6, Brown University, Department of Economics.
  4. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Ozbay, 2009. "Revealed Attention," NajEcon Working Paper Reviews 814577000000000409, www.najecon.org.
  5. Geoffroy de Clippel, 2012. "Behavioral Implementation," Working Papers 2012-6, Brown University, Department of Economics.
  6. Apesteguia, Jose & Ballester, Miguel A., 2013. "Choice by sequential procedures," Games and Economic Behavior, Elsevier, vol. 77(1), pages 90-99.
  7. Attila Ambrus & Kareen Rozen, 2008. "Rationalizing Choice with Multi-Self Models," Cowles Foundation Discussion Papers 1670, Cowles Foundation for Research in Economics, Yale University, revised May 2012.
  8. Heller, Yuval, 2012. "Justifiable choice," Games and Economic Behavior, Elsevier, vol. 76(2), pages 375-390.
  9. Geoffroy de Clippel, 2009. "Axiomatic Bargaining on Economic Enviornments with Lott," Working Papers 2009-5, Brown University, Department of Economics.
  10. Sandroni, Alvaro & Cherepavov, Vadim & Feddersen, Timothy, 2013. "Rationalization," Theoretical Economics, Econometric Society, vol. 8(3), September.
  11. Gerasimou, Georgios, 2012. "Asymmetric Dominance, Deferral and Status Quo Bias in a Theory of Choice with Incomplete Preferences," MPRA Paper 40097, University Library of Munich, Germany.

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