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Coping with complexity - Experimental evidence for narrow bracketing in multi-stage contests

Author

Listed:
  • Stracke, Rudi
  • Kerschbamer, Rudolf
  • Sunde, Uwe

Abstract

This paper investigates whether decision makers bracket their choices narrowly to facilitate complex decision problems. Evidence from a framing variation of rewards in experimental two-stage pairwise elimination contests indicates that decision makers neglect the option value of participation in future stages of the contest if the reward frame facilitates the separate consideration of stages, but not if the reward frame induces forward-looking behavior. Decision makers, account for the option value of participation in future stages of the contest independently of the reward frame, however, when complex strategic interactions in future stages of the contest are replaced by simple lotteries that facilitate the determination of the option value. The results present novel evidence for the prevalence and the determinants of choice bracketing as a means to cope with complexity. (C) 2017 Published by Elsevier B.V.

Suggested Citation

  • Stracke, Rudi & Kerschbamer, Rudolf & Sunde, Uwe, 2017. "Coping with complexity - Experimental evidence for narrow bracketing in multi-stage contests," Munich Reprints in Economics 49878, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:49878
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    Cited by:

    1. Pauline Vorjohann, 2023. "Reference-dependent choice bracketing," Discussion Papers 2309, University of Exeter, Department of Economics.
    2. Ert, Eyal & Cohen-Amin, Shier & Dinar, Ariel, 2019. "The effect of issue linkage on cooperation in bilateral conflicts: An experimental analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 79(C), pages 134-142.
    3. Deutscher, Christian & Neuberg, Lena & Thiem, Stefan, 2023. "Who’s afraid of the GOATs? - Shadow effects of tennis superstars," Journal of Economic Psychology, Elsevier, vol. 99(C).
    4. Dainis Zegners & Uwe Sunde & Anthony Strittmatter, 2020. "Decisions and Performance Under Bounded Rationality: A Computational Benchmarking Approach," CESifo Working Paper Series 8341, CESifo.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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