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

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  • De Clippel, Geoffroy
  • Eliaz, Kfir

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 individual’s conflicting dual selves. We axiomatically characterize a unique bargaining solution that captures both effects when the selves’ 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.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7414.

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Date of creation: Aug 2009
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Handle: RePEc:cpr:ceprdp:7414

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Related research

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

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References

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  1. Gil Kalai & Ariel Rubinstein & Ran Spiegler, 2001. "Rationalizing Choice Functions by Multiple Rationales," Discussion Paper Series dp278, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  2. Kfir Eliaz & Michael Richter & Ariel Rubinstein, 2011. "Choosing the two finalists," Economic Theory, Springer, vol. 46(2), pages 211-219, February.
  3. 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.
  4. Pierre-André Chiappori & Olivier Donni, 2006. "Learning from a Piece of Pie: the Empirical Content of Nash Bargaining," Cahiers de recherche 0619, CIRPEE.
  5. Nejat Anbarci, 2005. "Finite Alternating-Move Arbitration Schemes and the Equal Area Solution," Working Papers 0518, Florida International University, Department of Economics.
  6. repec:bla:restud:v:73:y:2006:i:3:p:689-714 is not listed on IDEAS
  7. Kfir Eliaz & Ran Spiegler, 2004. "Contracting with Diversely Naïve Agents," Levine's Bibliography 122247000000000530, UCLA Department of Economics.
  8. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Ozbay, 2009. "Revealed Attention," NajEcon Working Paper Reviews 814577000000000409, www.najecon.org.
  9. Attila Ambrus & Kareen Rozen, 2012. "Rationalizing Choice with Multi-Self Models," Working Papers 12-11, Duke University, Department of Economics.
  10. Anbarci, Nejat, 1993. "Noncooperative Foundations of the Area Monotonic Solutions," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 245-58, February.
  11. Green, Jerry & Hojman, Daniel, 2007. "Choice, Rationality and Welfare Measurement," Working Paper Series rwp07-054, Harvard University, John F. Kennedy School of Government.
  12. Özgür Kıbrıs & Murat Sertel, 2007. "Bargaining over a finite set of alternatives," Social Choice and Welfare, Springer, vol. 28(3), pages 421-437, April.
  13. Michele Lombardi, 2007. "Reason-Based Choice Correspondences," Working Papers 607, Queen Mary, University of London, School of Economics and Finance.
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Citations

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Cited by:
  1. Heller, Yuval, 2009. "Justifiable choice," MPRA Paper 15645, University Library of Munich, Germany.
  2. Attila Ambrus & Kareen Rozen, 2012. "Rationalizing Choice with Multi-Self Models," Levine's Working Paper Archive 786969000000000512, David K. Levine.
  3. de Clippel, Geoffroy & Bejan, Camelia, 2011. "No profitable decompositions in quasi-linear allocation problems," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1995-2012, September.
  4. Apesteguia, Jose & Ballester, Miguel A., 2013. "Choice by sequential procedures," Games and Economic Behavior, Elsevier, vol. 77(1), pages 90-99.
  5. Georgios Gerasimou, 2013. "A Behavioural Model of Choice in the Presence of Decision Conflict," Discussion Paper Series, Department of Economics 201302, Department of Economics, University of St. Andrews.
  6. Echenique, Federico & Chambers, Christopher P., 2014. "On the consistency of data with bargaining theories," Theoretical Economics, Econometric Society, vol. 9(1), January.
  7. 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.
  8. Geoffroy de Clippel, 2012. "Behavioral Implementation," Working Papers 2012-6, Brown University, Department of Economics.
  9. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Ozbay, 2009. "Revealed Attention," NajEcon Working Paper Reviews 814577000000000409, www.najecon.org.
  10. Sandroni, Alvaro & Cherepavov, Vadim & Feddersen, Timothy, 2013. "Rationalization," Theoretical Economics, Econometric Society, vol. 8(3), September.
  11. Geoffroy de Clippel, 2009. "Axiomatic Bargaining on Economic Enviornments with Lott," Working Papers 2009-5, Brown University, Department of Economics.

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