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Revealing Choice Bracketing

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  • Andrew Ellis
  • David J. Freeman

Abstract

Experiments suggest that people fail to take into account interdependencies between their choices -- they do not broadly bracket. Researchers often instead assume that people narrowly bracket, but existing designs do not test it. We design a novel experiment and revealed preference tests for how someone brackets their choices. In portfolio allocation under risk, social allocation, and induced-value shopping experiments, 40-43% of subjects are consistent with narrow bracketing and 0-16% with broad bracketing. Adjusting for each model's predictive precision, 74% of subjects are best described by narrow bracketing, 13% by broad bracketing, and 6% by intermediate cases.

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  • Andrew Ellis & David J. Freeman, 2020. "Revealing Choice Bracketing," Papers 2006.14869, arXiv.org, revised Mar 2024.
    • Handle: RePEc:arx:papers:2006.14869
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    References listed on IDEAS

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    Cited by:

    1. Chen, Junlin & Feng, Xiaojing & Kou, Gang & Mu, Mengting, 2023. "Multiproduct newsvendor with cross-selling and narrow-bracketing behavior using data mining methods," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 169(C).
    2. Kaufmann, Marc & Machado, Joël & Verheyden, Bertrand, 2021. "Why Do Migrants Stay Unexpectedly? Misperceptions and Implications for Integration," IZA Discussion Papers 14155, Institute of Labor Economics (IZA).
    3. Mu Zhang, 2021. "A Theory of Choice Bracketing under Risk," Papers 2102.07286, arXiv.org, revised Aug 2021.
    4. Francesco Fallucchi & Marc Kaufmann, 2021. "Narrow Bracketing in Work Choices," Papers 2101.04529, arXiv.org, revised Feb 2021.

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