Revealing choice bracketing

Ellis, Andrew ORCID: 0000-0002-7552-4832 and Freeman, David J. (2024) Revealing choice bracketing. American Economic Review, 114 (9). 2668 - 2700. ISSN 0002-8282

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Abstract

Experiments suggest that people fail to take into account interdependencies between their choices—they do not broadly bracket. Researchers often instead assume 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 percent of subjects are consistent with narrow bracketing, and 0–16 percent with broad bracketing. Adjusting for each model's predictive precision, 74 percent of subjects are best described by narrow bracketing, 13 percent by broad bracketing, and 6 percent by intermediate cases.

Item Type:	Article
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
Date Deposited:	20 Sep 2024 07:48
Last Modified:	03 Oct 2024 23:15
URI:	http://eprints.lse.ac.uk/id/eprint/125470

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