Coping with complexity – Experimental evidence for narrow bracketing in multi-stage contests

Rudi Stracke, Rudolf Kerschbamer and Uwe Sunde

European Economic Review, 2017, vol. 98, issue C, 264-281

Abstract: This paper investigates whether decision makers bracket their choices narrowly to facilitate complex decision problems. Evidence from a framing variation of rewards in experimental two-stage pairwise elimination contests indicates that decision makers neglect the option value of participation in future stages of the contest if the reward frame facilitates the separate consideration of stages, but not if the reward frame induces forward-looking behavior. Decision makers account for the option value of participation in future stages of the contest independently of the reward frame, however, when complex strategic interactions in future stages of the contest are replaced by simple lotteries that facilitate the determination of the option value. The results present novel evidence for the prevalence and the determinants of choice bracketing as a means to cope with complexity.

Keywords: Narrow bracketing; Multi-stage contest; Framing; Experiment (search for similar items in EconPapers)
JEL-codes: C72 D81 J33 M52 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:98:y:2017:i:c:p:264-281

DOI: 10.1016/j.euroecorev.2017.07.001

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