Reference-dependent choice bracketing

Pauline Vorjohann
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Pauline Vorjohann: Department of Economics, University of Exeter

No 2309, Discussion Papers from University of Exeter, Department of Economics

Abstract: I derive a theoretical model of choice bracketing from two behavioral axioms in an expected utility framework. The first behavioral axiom establishes a direct link between narrow bracketing and correlation neglect. The second behavioral axiom identifies the reference point as the place where broad and narrow preferences are connected. In my model, the narrow bracketer is characterized by an inability to process changes from the reference point in different dimensions simultaneously. As a result, her tradeoffs between dimensions are distorted. While she disregards interactions between actual outcomes, she appreciates these interactions mistakenly with respect to the reference point.

Keywords: narrow bracketing; correlation neglect; reference dependence; axiomatic foundation (search for similar items in EconPapers)
JEL-codes: D11 D3 D91 (search for similar items in EconPapers)
Date: 2023-09-05
New Economics Papers: this item is included in nep-dcm, nep-mic and nep-upt
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