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

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  • Eliaz, Kfir
  • de Clippel, Geoffroy

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

  • Eliaz, Kfir & de Clippel, Geoffroy, 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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    More about this item

    Keywords

    Attraction effect; Bounded rationality; Compromise effect; Cooperative bargaining; Fallback bargaining; Reason-based-choice;
    All these keywords.

    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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