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

Kfir Eliaz and Geoffroy de Clippel

No 7414, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper proposes a model of boundedly rational choice that explains the well known attraction and compromise effects. Choices in our model are interpreted as a cooperative solution to a bargaining problem among an individual?s conflicting dual selves. We axiomatically characterize a unique bargaining solution that captures both effects when the selves? preferences are known. We then provide a revealed preference foundation to our solution, and characterize the extent to which these two underlying preference relations can be uniquely identified.

Keywords: Attraction effect; Bounded rationality; Compromise effect; Cooperative bargaining; Fallback bargaining; Reason-based-choice (search for similar items in EconPapers)
JEL-codes: C71 C78 D03 D11 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (2)

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Working Paper: Reason-Based Choice: A Bargaining Rationale for the Attraction and Compromise Effects (2009)
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