American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Revealing Choice Bracketing
American Economic Review
vol. 114,
no. 9, September 2024
(pp. 2668–2700)
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.Citation
Ellis, Andrew, and David J. Freeman. 2024. "Revealing Choice Bracketing." American Economic Review, 114 (9): 2668–2700. DOI: 10.1257/aer.20210877Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making