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

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Among the most important and robust violations of rationality are the attraction and the compromise effects. The compromise effect refers to the tendency of individuals to choose an intermediate option in a choice set, while the attraction effect refers to the tendency to choose an option that dominates some other options in the choice set. This paper argues that both effects may result from an individual's attempt to overcome the difficulty of making a choice in the absence of a single criterion for ranking the options. Moreover, we propose to view the resolution of this choice problem as a cooperative solution to an intrapersonal bargaining problem among different selves of an individual, where each self represents a different criterion for choosing. We first identify a set of properties that characterize those choice correspondences that coincide with our bargaining solution, for some pair of preference relations. Second, we provide a revealed-preference foundation to our bargaining solution and characterize the extent to which these two preference relations can be uniquely identified. Alternatively, our analysis may be reinterpreted as a study of (interpersonal) bilateral bargaining over a finite set of options. In that case, our results provide a new characterization, as well as testable implications, of an ordinal bargaining solution that is previously discussed in the literature under the various names of fallback bargaining, unanimity compromise, Rawlsian arbitration rule, and KantRawls social compromise. Terms of use: Documents in

Dual random utility maximisation

“…3 Caplin and Martin [4] are distinctive in that they consider agents who can choose whether to make automatic (fast) or considered (slow) choices, depending on an attentional cost. 4 de Clippel and Eliaz [8] propose a dual-self model that can be thought of as a model of intra-household bargaining. Interestingly, this model exhibits the attraction and compromise effects that we study later in the paper.…”

Asymmetric dominance, deferral, and status quo bias in a behavioral model of choice

“…With regard to recent models of bounded-rational choice that can explain the attraction effect, Lombardi (2009), de Clippel andEliaz (2012), Ok, Ortoleva, and Riella (2015), Bordallo, Gennaioli, and Shleifer (2013) and Gerasimou (2015) are some recent references. These models are all reviewed in the latter paper.…”

Partially dominant choice

“…Three alternative explanations of the attraction effect that have been proposed in the very recent choice-theoretic literature are due to Lombardi (2009), de Clippel andEliaz (2012) and Ok, Ortoleva, and Riella (2015). 10 In Lombardi's (Lo) model the agent has acyclic preferences and chooses a preference-undominated option with the property that its lower contour set is not properly included to the lower contour set of some other undominated option.…”