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

Author

Listed:
  • 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.

Suggested Citation

  • de Clippel, Geoffroy & Eliaz, Kfir, 2009. "Reason-Based Choice: A Bargaining Rationale for the Attraction and Compromise Effects," CEPR Discussion Papers 7414, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7414
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    References listed on IDEAS

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    1. Pierre-André Chiappori & Olivier Donni, 2005. "Learning From a Piece of Pie: The Empirical Content of Nash Bargaining," THEMA Working Papers 2006-07, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. Kfir Eliaz & Ran Spiegler, 2006. "Contracting with Diversely Naive Agents," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 689-714.
    3. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, pages 2183-2205.
    4. Özgür Kıbrıs & Murat Sertel, 2007. "Bargaining over a finite set of alternatives," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 28(3), pages 421-437, April.
    5. repec:spr:grdene:v:10:y:2001:i:4:d:10.1023_a:1011252808608 is not listed on IDEAS
    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. Christopher P. Chambers & Federico Echenique, 2015. "The Core Matchings of Markets with Transfers," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 144-164, February.
    8. Green, Jerry & Hojman, Daniel, 2007. "Choice, Rationality and Welfare Measurement," Working Paper Series rwp07-054, Harvard University, John F. Kennedy School of Government.
    9. Attila Ambrus & Kareen Rozen, 2015. "Rationalising Choice with Multi‐self Models," Economic Journal, Royal Economic Society, vol. 125(585), pages 1136-1156, June.
    10. Sprumont, Y., 1991. "Intermediate Preferences And Rawlsian Arbitration Rules," Cahiers de recherche 9113, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    11. repec:mes:challe:v:29:y:1986:i:5:p:52-56 is not listed on IDEAS
    12. Lombardi, Michele, 2009. "Reason-based choice correspondences," Mathematical Social Sciences, Elsevier, vol. 57(1), pages 58-66, January.
    13. Huber, Joel & Payne, John W & Puto, Christopher, 1982. " Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis," Journal of Consumer Research, Oxford University Press, vol. 9(1), pages 90-98, June.
    14. Nejat Anbarci, 1993. "Noncooperative Foundations of the Area Monotonic Solution," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 245-258.
    15. Kfir Eliaz & Michael Richter & Ariel Rubinstein, 2011. "Choosing the two finalists," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(2), pages 211-219, February.
    16. Steven J. Brams & D. Marc Kilgour, 2001. "Fallback Bargaining," Group Decision and Negotiation, Springer, vol. 10(4), pages 287-316, July.
    17. Sprumont, Yves, 2000. "On the Testable Implications of Collective Choice Theories," Journal of Economic Theory, Elsevier, vol. 93(2), pages 205-232, August.
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    More about this item

    Keywords

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

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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