Revealing Choice Bracketing
Andrew Ellis, David J. Freeman
American Economic Review · 2024 · Volume 114 · Issue 9
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.
Keywords
Consumer Economics: Empirical Analysis, Criteria for Decision-Making under Risk and Uncertainty, Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
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